**Income beneficiary** (noun) — A person entitled to receive income generated by trust assets (such as rental payments, interest, or dividends) but who has no right to the underlying capital or principal of the trust. The income beneficiary's interest contrasts with that of a remainder beneficiary or capital beneficiary, who receives the trust assets themselves when the trust ends.
An income beneficiary gets the money a trust earns, but not the assets that produce that money.
Imagine a trust that owns a rental property and some shares. The income beneficiary receives the rent from the property and the dividends from the shares. But they don't own the property or the shares themselves—those belong to the trust. When the trust eventually ends, those assets go to someone else: the remainder beneficiary.
This arrangement is common when someone wants to provide ongoing financial support to one person while preserving the underlying assets for someone else. For example, you might set up a trust that gives your spouse income for life, with the capital going to your children after your spouse dies.
The income beneficiary can only receive what the trust actually earns. If the property sits vacant or the shares don't pay dividends, there's no income to distribute. And the income beneficiary has no say over how the trust assets are managed or invested—that's the trustee's job.
⏱ When you'll encounter this term
Income beneficiaries are most commonly seen in testamentary trusts—trusts created by your will.
A typical scenario: you want to make sure your surviving spouse is financially comfortable for the rest of their life, but you also want to ensure your children from a previous marriage eventually inherit. You could leave everything to your spouse outright, but then your children might get nothing if your spouse remarries or changes their will. Or you could split everything now, but that might not give your spouse enough to live on.
A trust with an income beneficiary solves this. Your spouse receives all the income the trust generates for life, giving them financial security. When they die, the capital passes to your children. The spouse gets support, the children eventually inherit, and no one has to fight over it.
The trustee managing this arrangement has to balance competing interests. They need to generate enough income to support the income beneficiary, but they also have to preserve the capital for the remainder beneficiaries. This can create tension—especially if the income beneficiary wants higher returns (which might mean riskier investments) while the remainder beneficiaries want the capital protected.
This is why choosing the right trustee and giving them clear guidance in your will matters so much when you're setting up this kind of arrangement.
**Related terms:** [Beneficiary](/dictionary/beneficiary), [Trust](/dictionary/trust), [Trustee](/dictionary/trustee), [Remainder beneficiary](/dictionary/remainderman)
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