Also known as: persons benefitted · person benefited · persons benefited · beneficiary
Written by attorneys · grounded in primary & secondary sources — see below
A person who receives the economic advantage of a transfer even though the transfer was made to another party. In bankruptcy, a trustee may recover the value of an avoided transfer from either the initial transferee or the person benefitted by the transfer.
Pacific Bank lent funds to Phoebe Park and took a deed of trust on her land naming the bank as beneficiary. When Phoebe defaulted, the trustee foreclosed and sold the property. The sale proceeds satisfied the debt owed to Pacific Bank, making the bank the person benefitted by the security device even though title had passed through the trustee.
Prism Analytics promised Premier Manufacturing that it would pay a debt Prism owed to Paige Porter. When Prism performed by making the payment directly to Paige, she became the person benefitted by the promise even though she was not the promisee in the contract between Prism and Premier.
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Patricia Patel granted an access easement across her land to benefit Philip Powell's adjoining parcel. Philip relied on the easement by building a driveway and selling his parcel to a buyer who continued using the route. The buyer became the person benefitted by the servitude when a court enforced it despite a statute-of-frauds defect.
A settlor created a trust leaving an outright remainder to Piper Patel upon the life beneficiary's death. After the settlor died, Piper became disabled. The court converted the remainder into a special-needs trust so that Piper remained the person benefitted by the trust assets without losing public benefits.
A trustee sold trust property at an undervalue to a third party. The sole beneficiary, Phuong Pham, later learned the facts and ratified the sale in writing. Because of the ratification, the trustee avoided liability to Phuong, who remained the person benefitted by the trust despite the breach.
Pinnacle Holdings contracted with a builder to construct a warehouse and required the builder to obtain a payment bond ensuring that all subcontractors would be paid. When a subcontractor remained unpaid, the subcontractor became the person benefitted by the bond promise and could enforce it directly against the surety.
A trustee may recover the value of an avoided transfer from the person benefitted by the transfer instead of the initial transferee under 11 U.S.C. § 550(a). This allows recovery from the party that ultimately received the economic advantage even if the transfer was made to someone else.
A contract beneficiary who receives performance may be treated as the person benefitted in a later bankruptcy avoidance action if the performance itself constitutes an avoidable transfer. The trustee can then reach the beneficiary directly for recovery of the value transferred.
When a court modifies a trust to preserve assets for a disabled remainder beneficiary, that beneficiary remains the person benefitted by the trust. The modification furthers the settlor's intent without changing the identity of the ultimate economic recipient of the trust property.
…that "an interest in a spendthrift trust has been held to constitute "property" for purposes of § 6321' even though the beneficiary may not transfer that interest to third parties"). Excluding property from a federal tax lien simply because the taxpayer does not have the power to unilaterally alienate it would,…