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Trust & Estate Planning
Beneficial Interest: Different Types and Examples
Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.
Marguerita is a Certified Financial Planner (CFP®), Chartered Retirement Planning Counselor (CRPC®), Retirement Income Certified Professional (RICP®), and a Chartered Socially Responsible Investing Counselor (CSRIC). She has been working in the financial planning industry for over 20 years and spends her days helping her clients gain clarity, confidence, and control over their financial lives.
What Is Beneficial Interest?
A beneficial interest is the right to receive benefits on assets held by another party and is often evident in matters concerning trusts.
Most beneficial interest arrangements are in the form of trust accounts, where an individual, the beneficiary receives income from the trust's holdings but does not own the account.
- A beneficial interest is the right to receive benefits from assets held by another party.
- A Crummey trust is often set up by parents for their children where the beneficiary has an immediate interest.
- A beneficiary receives income from a trust's holdings but does not own the account.
How Beneficial Interest Works
A beneficiary interest will change depending on the type of trust account and the rules of the trust agreement.
A beneficiary typically has a future interest in the trust's assets meaning they might access funds at a determined time, such as when the recipient reaches a certain age.
Trusts for Children
For example, a parent may set up a testamentary trust to benefit their three children upon the parent's death. The trust creator can stipulate the distribution of the account's assets to the children during the parent's lifetime.
Additionally, a beneficial interest can be a house owned by a trust, where a child is a trust beneficiary and can use the house, both income tax and rent-free.
Beneficial interest will alter depending on the rules of a trust's arrangement and the type of trust account.
Parents may set up Crummey trusts , funded through annual gifts, to take advantage of gift tax exclusions. With Crummey trusts, the beneficiary has an immediate interest and access to the trust's assets for a specified timeframe. For example, the beneficiary may be able to access the trust's funds within the first 30 or 60 days after the transfer of a gift. Those assets fall under the distribution rules governing the trust.
Other Examples of Beneficial Interest
Another example of beneficial interest is in real estate. A tenant renting a property is enjoying the benefits of having a roof over their head. However, the renter does not own the asset.
Beneficiary interests can also be applied to employer-sponsored retirement plans such as 401(k)s and Roth 401(k)s, as well as in individual retirement accounts (IRA) and Roth IRAs.
With these employer-sponsored accounts, the account holder may designate a named beneficiary who can benefit from the account funds in the event of the account holder's death. The rules governing beneficiary interest in these cases vary widely depending on the type of retirement account and the identity of the beneficiary.
A spouse beneficiary to an IRA has more freedom over the assets than anyone else. The surviving spouse can treat the account as their own, rollover assets into another plan—if the IRS allows— or designate themselves as the beneficiary.
A non-spouse beneficiary to an IRA, for example, can't treat the account as their own. Thus, the beneficiary can't make contributions to the account or roll over any assets in or out of the IRA.
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The Concept of Transfer of Beneficial Ownership of Securities
January 4, 2021 > Malaysia > Corporate and Commercial
Azmi & Associates | View firm profile
Legally, an ownership can be classified into two; (1) legal and (2) beneficial ownership. A legal owner is a person who holds the legal title under his name, whereas a beneficial owner is a person who enjoys the benefits of ownership even though the title is in another name.
Generally, a legal owner of securities (which is defined under section 2 of the Capital Markets And Services Act 2007 as: (a) debentures, stocks or bonds issued or proposed to be issued by any government; (b) shares in or debentures of, a body corporate or an unincorporated body; or (c) units in a unit trust scheme or prescribed investments) is also the beneficial owner of such securities.
The legal owner is not necessary the beneficial owner
There are circumstances where the legal owner is not necessarily the beneficial owner of the securities. For example, Section 101(1) of the Companies Act 2016 (“ CA 2016 “) provides that the name of a person in the register of members as a shareholder is prima facie evidence that the legal title to the share is vested in that person.
However, although such person is considered as a legal owner of the shares, pursuant to Section 8(9)(a) of the CA 2019, such person will not be considered as the beneficial owner of such shares if he holds the shares as a trustee.
In other words, a registered shareholder is deemed as the legal owner of the shares registered under his/its name, but he/it may be holding such shares for the interest and benefit of a beneficial owner pursuant to a trust or nominee arrangement.
The separation of legal and beneficial ownership
The separation of legal and beneficial ownership of a security happened based on the arrangement of the parties. Below are some examples of circumstances where the beneficial ownership of securities is separated and transferred:
(1) Scenario 1
A, purchased shares in a company and made an arrangement with B, that the shares purchased by A will be registered under B’s name and B shall hold the shares as a trustee on behalf of A.
Whilst B will be the registered shareholder of the shares, A will retain and enjoy the rights and interest of the shares as the beneficial owner.
(2) Scenario 2
A, a legal and beneficial owner of stocks in a company entered into an arrangement with B, that A shall give the rights and interest attached to the stocks to B, making B the beneficial ownership of the stocks whilst A will retain his name as the registered owner of the stocks.
(3) Scenario 3
A, a legal and beneficial owner of scripless shares in a public or public listed company entered into a loan agreement with B, which A would create a Pledged Securities Account making B the beneficial owner of such shares.
(4) Scenario 4
A, a beneficial owner of scripless shares in a public or public listed company create a nominee Central Depository Account where his nominee company, B will hold the shares as his nominee.
How the beneficial ownership is transferred
In the circumstance where the legal owner who also assumes the beneficial ownership of securities transfers his ownership to another party, such beneficial ownership is deemed to be transferred together with the legal ownership.
For example, in the case of transfer of shares or debentures, the transfer can be done by way of executing an instrument of transfer provided under the CA 2016 and the transfer will be affected when the name of the transferee is recorded in the register of members or register of debenture holders.
In other circumstances, such as Scenarios 1 and 2, the transfer of the beneficial ownership is usually will be done by way of a trust deed.
The trust deed will record such arrangement including the rights of the beneficial owner, the benefits of the securities that will be enjoyed by the beneficial owner, restrictions, limitations and powers granted to the legal owner. The beneficial owner may also enter into a power of attorney giving certain rights to the legal owner to deal with the securities.
In Scenario 3 and Scenario 4, when the beneficial owner of deposited securities wishes to transfer his beneficial ownership, he is required to complete a prescribed form and expressly indicate in a particular section of the form as to the reason for the transfer, by indicating whether the proposed transfer will result in change or in no change in beneficial ownership of the shares.
The transfer must falls within approved reasons for transfer such as take-over offer, transfer between family member, transfer involving government authorities, pledge/ charge or reasons with prior approval of Bursa Depository.
The legal owner of securities is not necessary an actual owner. There may be another person or entity that may hold such securities as a beneficial owner. Distinction must be made between legal owner and beneficial owner of securities, especially shares in a company. Although under the CA 2016 the company may require the legal owner to disclose the identity and particulars of the beneficial owner, such requirement is subject to the discretion of the company to enquire for such information or any direction from the registrar of companies, stock exchange or securities commission for the company to obtain such information.
1 Section 101(1) of CA2016 “in absence of evidence to the contrary, the entry of the name of a person in the register of members as shareholder is prima facie evidence that legal title to the share is vested in that person”
2 Section 8(9)(a) of the CA 2019 “For the purposes of this section, an interest in a share shall be disregarded as an interest if it is- (a) an interest of a person who holds the share as bare trustee;”
3 Section 105(1) of CA 2016 “subject to any other written laws, any shareholder or debenture holder may transfer all or any of his shares or debentures in the company by a duly executed and stamped instrument of transfer and shall lodge the transfer with the company.”
4 Section 105(3) of CA 2016 “For the purpose of effecting the transfer of shares or debentures, the company shall enter the name of transferee in the register of members or register of debenture holders in accordance with this section.
5 FAQ on CDS, Bursa Malaysia “Effective 1 st September 1998, any transfer requests must be within the approved reasons of transfer prescribed by Bursa Malaysia Depository.”
6 Section 56 of CA 2016 “(1) Any company may, by notice in writing, require any member of the company within such reasonable time as is specified in the notice-
(a) to inform the company whether the member holds any voting shares in the company as beneficial owner or as trustee; and
(b) if the member holds the voting shares as trustee, so far as it is possible to do so, to indicate the persons for whom the member holds the voting shares by name and by other particulars sufficient to enable those persons to be identified and the nature of their interest.”
7 Section 56(6) of CA 2016 “the Registrar, a stock exchange or the Securities Commission may, by notice in writing, direct a company to invoke its powers under subsection (1) and (2) to immediately provide it with the information so obtained.”
Prepared by: Farahin Abd Manaf & Liana Lim Xi Ci
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Assignment of Beneficial Interest definition
Examples of assignment of beneficial interest in a sentence.
Assignment of Beneficial Interest in Trust created under Chapter 689, F.S.: Effective July 3, 1979, any document which conveys any beneficial interest in a trust agreement is subject to tax, and the tax is to be paid upon execution of the document.
Transfer an Assignment of Beneficial Interest (ownership, stock, etc.)A Change of Permit application is required if the change to beneficial interest is within 10% to 49%, which does NOT result in the transferee holding 50% or more beneficial interest in the license.
This Assignment of Beneficial Interest is being made and entered into pursuant to the Purchase Agreement and shall be governed by and construed in accordance with the laws of the State of New York.
Pursuant to the Deed and the Assignment of Beneficial Interest , the Lessee has sold to the Lessor the Real Property Interest.
Exceptions for a [Facsimile] Collateral Assignment of Beneficial Interest for Illinois Land Trust loans are acceptable.
Upon any occurrence that could impact servicing functions, including but not limited to, Assignment of Beneficial Interest , modification of Loan terms, Client must notify Servicer immediately of such occurrence and provide copies of relevant documents before servicing functions will be performed, continued, or funds distributed.
GVS recorded a Notice of Assignment of Beneficial Interest in the Trust Deed and filed a new financing statement.
Upon satisfaction of the conditions in Section 11(b), on the Closing Date, the Lessee shall deliver to the Owner Trustee the Xxxx of Sale, the Deed and the Assignment of Beneficial Interest .
The shares were first listed on December 17, 2001 and the average listing in the last quarter of 2006 and at December 31, 2006 (2005) was 2.55 (2.46) and 2.33 (2.36), euros per share, respectively.
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More Definitions of Assignment of Beneficial Interest
Related to assignment of beneficial interest.
Beneficial Interest means the opportunity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, to profit, or share in any profit derived from, a transaction in the subject Securities. A Covered Person is deemed to have a Beneficial Interest in Securities owned by members of his or her Immediate Family. Common examples of Beneficial Interest include joint accounts, spousal accounts, UTMA accounts, partnerships, trusts and controlling interests in corporations. Any uncertainty as to whether a Covered Person has a Beneficial Interest in a Security should be brought to the attention of the Compliance Officer. Such questions will be resolved in accordance with, and this definition shall be subject to, the definition of “beneficial owner” found in Rules 16a-1(a)(2) and (5) promulgated under the Securities Exchange Act of 1934.
Assignment of Benefits means an arrangement whereby the Plan Participant assigns their right to seek and receive payment of eligible Plan benefits, in strict accordance with the terms of this Plan Document, to a Provider. If a provider accepts said arrangement, Providers’ rights to receive Plan benefits are equal to those of a Plan Participant, and are limited by the terms of this Plan Document. A Provider that accepts this arrangement indicates acceptance of an “Assignment of Benefits” as consideration in full for services, supplies, and/or treatment rendered.
Certificate of Beneficial Ownership means a certificate substantially in the form of Exhibit H.
Transfer Restricted Definitive Notes means Definitive Notes that bear or are required to bear or are subject to the Restricted Notes Legend.
IAI Global Note means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.
Beneficial Holder A Person holding a beneficial interest in any Book-Entry Certificate as or through a DTC Participant or an Indirect DTC Participant or a Person holding a beneficial interest in any Definitive Certificate.
Regulation S Certificate means a certificate substantially in the form of Exhibit E hereto.
Individual Note A Note of an Original Note Principal Balance of $25,000; a Note of an Original Note Principal Balance in excess of $25,000 shall be deemed to be a number of Individual Notes equal to the quotient obtained by dividing such Original Note Principal Balance amount by $25,000.
Regulation S Transfer Certificate A certificate substantially in the form of Exhibit I-1 or Exhibit I-2 hereto, as applicable.
Certificated Note means a Note in registered individual form without interest coupons.
Offshore Global Note means a Global Note representing Notes issued and sold pursuant to Regulation S.
Global Note shall have the meaning specified in Section 2.05(b).
144A Global Note means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
Permanent Offshore Global Note means an Offshore Global Note that does not bear the Temporary Offshore Global Note Legend.
Beneficial use means the right to possession, use, and enjoyment of property, limited only by encumbrances, easements, and restrictions of record.
Capital Security Beneficial Owner means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency).
U.S. Global Note means a Global Note that bears the Restricted Legend representing Notes issued and sold pursuant to Rule 144A.
Registered Global Note means a Regulation S Global Note or a Rule 144A Global Note;
Preferred Security Beneficial Owner means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency).
body in which the relevant person has a beneficial interest means a firm in which the relevant person is a partner or a body corporate of which the relevant person is a director, or in the securities of which the relevant person has a beneficial interest;
Transfer Restricted Global Notes means Global Notes that bear or are required to bear or are subject to the Restricted Notes Legend.
Rule 144A Global Note means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in an initial denomination equal to the outstanding principal amount of any Additional Notes initially sold in reliance on Rule 144A.
Unrestricted Definitive Note means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.
Restricted Definitive Note means a Definitive Note bearing the Private Placement Legend.
Regulation S Temporary Global Note means a temporary Global Note in the form of Exhibit A hereto, bearing the Global Note Legend, the Private Placement Legend and the Regulation S Temporary Global Note Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903.
Regulation S Global Note means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of Regulation S.
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