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Need for a Trust. To keep aside part of the wealth for the benefit of Dependents during the lifetime of the person and after To ensure proper care of the wealth due to mental incapacity, physical disability, insufficient age etc. of the Dependents
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Need for a Trust To keep aside part of the wealth for the benefit of Dependents during the lifetime of the person and after To ensure proper care of the wealth due to mental incapacity, physical disability, insufficient age etc. of the Dependents To ensure effective control during the lifetime & after as per the wishes of the person. For Philanthropic reasons Avoid disputes or other complications by relatives on inheritance after one’s passing away
What is Trust Trust is a vehicle under which wealth is transferred from the original owners and is held by the person to whom it is transferred for the benefit of others Types of Trusts Depending upon for whose benefit the trust has been created, the trusts are generally classified as: Public Trusts Private Trusts
Difference between a Private Trust and a Public Trust Private Trust The beneficial interest is vested absolutely in one or more individuals who are ascertainable Public Trust Members of an uncertain and fluctuating body and the Trust itself is of a permanent nature and indefinite character A common example is a Trust that provides for the accumulation of income and capital for specified Infants. Subject to their maintenance during this period, the accumulation must be handed over to them upon their attaining a specified age or, in the case of a female beneficiary, upon marriage.
The Law The law relating to Private Trusts and Trustees is codified under Indian Trusts Act, 1882 Definition of “Trust” and other related terms under the Act A “Trust” is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by owner, or declared and accepted by him, for the benefit of another, or of another and the owner
Who’s Who • The person who reposes or declares the confidence is called the “Author of the Trust”’ • The person who accepts the confidence is called the “Trustee” • The person for whose benefit the confidence is accepted is called the “Beneficiary” • The subject-matter of the Trust is called “Trust Property” or “Trust Money” • The “Beneficial Interest” or “Interest” of the beneficiary is his right against the Trustee as owner of the Trust property’ and the instrument, if any, by which the Trust is declared is called the “Instrument of Trust”
Trust of Immovable/moveable Property No trust in relation to immovable property is valid unless declared by a non testamentary instrument in writing signed by the ‘Author of the Trust’ or the ‘Trustee’ and Registered, or by the Will of the Author of the Trust or of the Trustee Trust of Moveable Property – No trust relating to moveable property is valid unless declared as aforesaid, or unless the ownership of the Property is transferred to the Trust
Creation of Trust Subject to the provisions of Section 5, a Trust is created when the Author of the Trust writes • An intention on his part to create thereby a Trust, • The purpose of the Trust, • The Beneficiary, and • The Trust property and (unless the Trust is declared by will or the author of the Trust is himself to be the trustee) transfers the trust property to the trustee. Trust may be created – a) By a person competent to contract, and b) With the permission of a principal civil court of original jurisdiction, by or on behalf of a minor
Creation of Trust cont. • If the Trust involves transfer of immovable property by the Author • Author must sign a deed of declaration of Trust on payment of stamp duty as applicable in the concerned State • Deed of Trust is required to be registered on payment of the registration fee in accordance with the provisions of the Registration Act, 1908 • If the Trust involves transfer of movable property by the Author • Author can deliver the movable property to the Trustee with the necessary oral directions without a formal document or written agreement • Advisable to execute a Trust Deed and have it signed by the Author and the Trustees in the presence of a witness to avoid any subsequent disputes • There is no mandatory requirement to register a deed of Trust for movable property
Beneficiary – Trustee Who may be a Beneficiary Every person capable of holding property may be beneficiary. Who may be Trustee Every person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract. The trustee is required to fulfill the purpose of the Trust and to obey the directions of the Author of the Trust given at the time of its creation, unless modified by the consent of all the Beneficiaries
Investment of Trust Money Where the Trust property consists of money, the Trustee is bound (subject to any direction contained in the instrument of Trust) to invest money in the following securities and no others: In specified securities permitted under the Act. In securities expressly authorized by the Instrument of Trust
Extinction/Revocation of Trust Trust is extinguished a) when its purpose is completely fulfilled. b) when its purpose becomes unlawful. c) when the fulfillment of its purpose becomes impossible by destruction of the trust property or otherwise. d) when the trust, being revocable, is expressly revoked Trust is revoked at the pleasure of the Testator A trust otherwise created can be revoked only a) By consent of all the Beneficiaries (competent to contract) b) Where the Trust has been declared by a non-testamentary instrument or by word of mount-in exercise of a power of revocation expressly reserved to the author, of the trust, or c) Where the Trust is for the payment of the debts of its Author and has been communicated to the creditors by the Author of the Trust
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