Private Trust Creation:


What is Trust?

Trust is a fiduciary relationship under which a person gives a right to the other person or institution to hold the property whether movable or immovable, for the benefit of a third party. The person who hands over the property is known as the author, the person who receives it is known as the trustee and the person who benefits from it is known as the beneficiary. Any person who is competent to contract can be a trustee.

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 What is private trust?

The creation of  private trust is another method of transferring a person's property. A private trust is also known as an Asset Protection Trust. The private trust creates a relationship in which one gives another party authority to handle his assets for the benefit of the third party known as the beneficiary, especially when the beneficiaries are minor or not capable of protecting their interest. A trust can be living or testamentary, funded or non-funded, revocable or irrevocable. Broadly speaking, a trust can be private or public . The Indian Trusts Act, 1882 governs private trusts. The Charitable and Religious Trusts Act, 1920, the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890, the Societies Registration Act, 1860, and the Bombay Public Trust Act, 1950 are the relevant legislations for the recognition and enforceability of public trusts.

 What are the essentials to create a Private Trust?

Essentials for the creation of private trust in India are as follows:

  • Express declaration by the author
  • The intention to create a private trust
  • Purpose of a private trust
  • Name of the trustee
  • Trust property
  • The beneficiaries
  • Transfer of trust property to trustees

 Private Trust Rules

As per Section 5 of the Indian Trusts Act, 1882:

  • In the case of  Immovable property a private trust shall be created by way of a non-testamentary instrument in writing. Also, the instrument shall be signed by the trustee and needs to be registered. However, if the instrument is created by way of a will, its registration is not necessary.
  • In the case of  movable property a trust can be declared similar to immovable property or by transferring the ownership of the property to the trustee. Therefore, its registration is not mandatory.

 How to create a private trust in India?

A trust deed is a document that is mandatory to set up a trust and shall be registered with the Registrar. The trust deed should be executed on  stamp paper.

 The deed shall contain the following:-

  • the details concerning trust property,
  • purpose of the trust and
  • beneficiaries of the trust.

Conclusion

Private Trust is one of the easiest and commonly used ways of transferring assets to your loved ones. ELT Consultants provide service for Private Trust Creation and have a team of professionals who are the best Private Trust Creation Lawyers in India.

FAQs

A person who is either a major or minor and is of sound mind is allowed to create a trust. In the case of minors, permission from a court is needed to establish a trust.

A trust cannot exist in the following situations:

  • Wherein the purpose of the trust is not achieved; or
  • In case the trust is involved in or carries out illegal activities or
  • The trust has been canceled or nullified.
One shall register every non-testamentary instrument declared as trust and it is mandatory even if the instrument is exempted from registration as per the Registration Act. Whereas, a Private Trust mentioned in a will does not need to be registered.
In Public Trust, the beneficiary is society and is regulated by its respective State Government. Whereas, a private trust is created for the benefit of an individual or a group of individuals. It is governed and regulated by the Indian Trusts Act, 1882.
  • A private trust can be created by way of a will or trust deed,
  • The purpose or intention of trust decides whether it is a private trust or public trust.
  • In case, the property is transferred to the trust under the will, therefore, as per the stamp laws no stamp duty will be applicable on transfer of property to the trust.
Yes, an individual who is a major, not of unsound mind, insolvent can create a trust. However, a minor can create a trust with the permission of the court

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