What Is the Definition of a Beneficiary Trust?

"Beneficiary trust" is not a legal term in Florida. People often use it for an irrevocable trust set up to hold property for the benefit of named beneficiaries. The trustee manages the property under the trust terms.

An irrevocable trust does not avoid income tax. Depending on how the trust is written, its income is taxed to the trust, to the beneficiaries who receive distributions, or to the grantor. Whether the property is part of anyone's taxable estate also depends on the trust terms.

A trust with spendthrift terms can limit what a beneficiary's creditors can reach, but Florida law has exceptions. Under section 736.0503, a spendthrift provision cannot be enforced against a beneficiary's child, spouse or former spouse with a support order, a creditor who provided services to protect the beneficiary's interest in the trust, or certain state and federal claims.