Discretionary Beneficiary

Discretionary beneficiaries are beneficiaries, meaning their names are written into some trust, life insurance policy, or retirement plan of someone else. Beneficiaries get paid monaaayyyy...but discretionary beneficiaries have to wait. Maybe they’re four (too young), or never have more than five bucks to their name (bad with money).

Legally, discretionary beneficiaries should see some kind of a payout eventually, but trustees can decide the terms, making things potentially tricky for the discretionary beneficiary. It helps if the grantor of the trust (the dead person) wrote a letter with some deets so that the discretionary beneficiary doesn’t get left out in the cold.

Discretionary beneficiaries are often people, but they can also be organizations, like charities, who can collect the money without owing income taxes on the amount. Sweeeeeet.