Trust is a concept that has been in practice since ancient times. This concept came into practice when properties were dedicated to charity, education, social welfare and medical purposes. The Indian Trust Act, 1882 came into existence keeping the English Trust Laws as a base.
What is Trust in an Indian Context ?
According to the Indian Trust Act 1882, all registered trusts in India are governed by its legal provisions. Usually, the Trust is described as a legal arrangement where the Trust’s owner transfers property to the Trustee (also known as beneficiary). Its purpose is to ensure the smooth transfer of assets among the beneficiaries in accordance with the Trust deed.
Selecting a trustee who will administer the Trust and finally distribute its assets to the designated beneficiaries selected by the grantor when the Trust is established is the responsibility of the trustee, selected by the grantor. Heir, family members, or charity are some common beneficiaries of the Trust in India.
Trusts can be utilized to reduce taxes, simplify or avert the probate process & safeguard assets
Parties in a trust
A trust is composed of three parties – trustor, trustee, and beneficiary.
Trustor – A trustor is the one who grants permission to the trustee to take control over the assets, estate or property. They are the ones who create the agreements.
Trustee – A trustee is responsible for managing the trust. They have been appointed by the trustor. They are in charge of the trust and the assets that the trustor asks them to take care of.
Beneficiary – Beneficiary or beneficiaries are people who gain the benefits from the trust agreement. The beneficiaries are given the assets from the trustor in accordance with the agreement.
A trust can be of three types:
- Public trust
- Private trust
- Public-cum-Private trusts
Public trusts are trusts whose beneficiaries are the general public in a large or sizable number. These trusts are also known as Non-Profit Charitable Organization or Non-Government Organization. Public trusts can be further classified into two types
- Public charitable trust
- Public religious trust
Charitable and religious trust falls under the rule of “Charitable and Religious Trusts Act, 1920, Religious Endowment Act, 1863, Charitable Endowments Act, 1890, Bombay Public Trusts Act, 1950.
A private trust is a trust whose beneficiaries are individuals or families. Private trusts are further classified into
- Private Special Trust/ Private Discretionary Trust – In such cases beneficiary and the share are determined.
- When the beneficiary and the share is uncertain
As the name suggests, the Public-Cum-Private Trusts serve a dual purpose. They are eligible to use their income for the public as well as private purposes. That implies that beneficiaries of such Trust could be either public or private persons or both.
Overview of Trust registration
Trust registration is the process of legalizing the trust deed (a legal contract between the settlor and trustee) with the registrar of the respective jurisdiction. The Trust serves as a legal medium liable for the lawful distribution of the settlor’s assets among the concerned beneficiaries. The Trust comes to an effect as soon as the registrar provides its authorization to the trust deed.
Trust registration process
Always ensure to make the following decisions before registering a trust
- Name and address of the trust
- Object of the trust (either charitable or religious trust)
- One settler and two trustees of the trust
- Movable or immovable trust property
- Prepare a trust deed on stamp paper of the value that is expected
The following are the registration requirement of the trust deed with the local registrar under the Indian Trust Act, 1882:
- Trust deed on stamp paper of the expected value
- Passport size photograph and a copy of settlers identity
- One passport size photograph and a copy of identity proof of each of the trustees
- Passport photograph and identity proof of each of two witnesses
- Settler’s signature on all pages of the trust deed
- Mention two witnesses on the trust deed
The trust deed along with the photocopy of registration needs to be submitted to the local registrar. The trust deed must have the signature of the settler on all the pages. During the time of registration, the settler and two of the witnesses have to be present in person with their original identity proofs
The original trust deed is returned back while the photocopy of the trust deed is retained by the registrar.
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