At WiseGEEK, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.

Learn more...

What is a Beneficial Interest?

Claudette M. Pendleton
Claudette M. Pendleton

A beneficial interest is any interest in property that is of significance, worth, value, or use that a person does not own. One example is when a person has interest in a trust because he or she is the beneficiary of the trust. Having a beneficial interest can also have other meanings, such as when an owner of a property has sole benefit, profit, and advantage to his or her own property.

The right that a person has in a contract created with another person is also referred to as a beneficial interest. If X, for example, creates a contract with Y and agrees to pay Z a specific amount of money, Y has a legal interest, but Z has beneficial interest. Z is the party who benefits from the contract.

Woman holding a book
Woman holding a book

There are situations when someone may have an interest of value in the remainder portion of an estate after all debts and expenses are paid. A person may be able to receive a benefit or profit as a result of having a contract with someone or some type of ownership of an estate. In a case like this, however, the person does not necessarily have lawful possession or power over the estate.

There are specific ways in which a person can own property; however, the law varies by jurisdiction. In the United States, for example, there are two methods. One way is ownership according to a title deed, and the other is ownership according to how much a person has contributed to the property. How much a person contributes to the property can result in the person having beneficial interest in the property.

Although two people's names are on the title deeds and the property is owned jointly, it does not always mean that the proceeds from a sale of the property would automatically be divided equally between the joint owners. If one person makes more contributions to the property than the other, the person who has made more contributions to the property may be ruled as having more interest, benefits, or more shares in the property when the property is sold, for example. This would generally be decided by a court of law.

Another type of beneficial interest is referred to as a conditional beneficial interest. This is the right of a person to share in an asset, benefit, or gain that is granted to a beneficiary, but only if particular conditions are met. If the conditions are not met, the person with the contingent beneficial interest cannot exercise his or her right to share in the assets or benefits received by the beneficiary.

Discuss this Article

Post your comments
Forgot password?
    • Woman holding a book
      Woman holding a book