A Look at Beneficial Ownership

Beneficial ownership allows you to enjoy the benefits of owning a security without officially holding it in your name of possession. The security, property or other asset is typically held with a broker or trustee who manages the title on your behalf. You are listed as the beneficial owner on the asset which means you obtain all of the benefits of the ownership, including voting rights. 

Beneficial Ownership Example

As a business owner, it is wise to act as the beneficial owner of a number of assets even when the business itself is the true owner. For example, let us assume you have personally taken a loan out to finance the ownership of your business property. You have placed personal assets as collateral, and you would prefer to receive the tax deductions personally instead of applying it to your business. If the property title is in your name, you can be open for risk.

Instead, you can make yourself the beneficial owner of the asset. The legal owner is still the business. You will personally have control over the asset, and you will be able to deduct taxes on the property from your personal tax schedule. For legal purposes, however, the business is the official owner. 

Reasons to Explore Beneficial Ownership

Beneficial ownership is used as a legal protection for your assets. By legally placing them within a limited liability company, such as your business or a trust, you can remove personal liability for ownership of the assets. As a beneficial owner of the assets you can still retain all of the benefits a typical owner would enjoy. This includes voting power, control and tax deductions.

Establishing Beneficial Ownership

In order to establish a beneficial ownership, you will first need to find an individual that is willing to serve as the legal owner of your asset. Your financial manager, or business, is the most common legal owner. Many times, individuals establish trusts to help them with the ownership.

If you use your financial manager or trust, you will pay a trustee a fee in return for the service of managing the legal ownership of your asset. This fee is typically a percentage of the total assets under management. Then, the trustee will list you as the beneficial owner on each of the assets held in trust. Depending on the type of asset, the process for establishing a beneficial owner will vary.

Beneficial Ownership Changes

You may change the beneficial owner on an asset, but this often requires consent from all parties involved. For example, you may determine at some point in the future you should no longer be the beneficial owner of assets owned by your business. You may change the beneficial owner to your business by signing documents confirming the change. This is true with Treasury bonds and other types of government issued assets. It is important to keep everything in writing and update your records quarerly, or yearly, depending on your personal requirements.

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