Beneficial Interests vs Equitable Interests

Beneficial interest and equitable interest are both terms used in property law and trusts law to describe the ownership or interest in a property. Although they are often used interchangeably, they are not exactly the same, and their subtle differences must be understood properly.

Beneficial interest refers to the right to receive the benefits or profits of a property, while legal title is held by another person or entity. This means that the holder of the beneficial interest has an economic interest in the property, but not necessarily the legal right to control or use it. For example, if a trust is created and the trustee holds legal title to the property, the beneficiaries of the trust have a beneficial interest in the property.

Equitable interest refers to the right to use and enjoy the property or receive its profits, as well as the right to acquire legal title to the property under certain conditions. An equitable interest is considered a legal interest, although it is not the same as legal title. For example, if a buyer who has entered into a contract and paid his money to purchase a property, he may have an equitable interest in the property before the transfer of legal title is complete.

In many cases, equitable interest and beneficial interest are the same, so these two terms are often used interchangeably. However, it should be noted that beneficial interest and equitable interest are not always the same because even where a trust exists the equitable and beneficial titles might not coincide. For example, in case of a sub-trust, the beneficiary of the original trust can hold his equitable interests on another trust for the benefit of another person. In this way, the legal title is held by the original trust, the equitable title is held by the sub-trust, and the beneficial interest is held by another person.