Transfer Property Through Trust

Transfer Property Through Trust

A trust is an arrangement by which the property of the author of the trust or settlor is transferred to another, the trustee, for the benefit of a third person, the beneficiary. The India Trusts Act, 1882 (act) governs private trusts. the Societies Registration Act, 1860 and the Bombay Public Trust Act, 1950 are the statutes most commonly relied upon to determine the recognition and enforceability of public trusts.

The Trust creator, sometimes known as the ‘Grantor’ or ‘Settlor’, is the person who started out as the owner of the property that is to be transferred to and held by the Trust. There may be one or more trustees. The trustee is obligated to act in accordance with the terms of the Trust for the benefit of the Trust beneficiaries.

A person may set up a private trust under a written instrument; that is, either through a will or through a written trust deed during the person’s lifetime. 

India does not recognize trust as a separate entity  A trust is identified as a legal obligation that is attached to the ownership of property arising out of confidence placed by the settlor is the trustee for the benefit of the beneficiaries

Succession Planning through a Private Trust:

Succession through a Private Trust mechanism is a common mode of the transition of assets as the Trust provides better legal protection, certainty, and flexibility.

Trust is governed by the Indian Trust Act, 1882 (“Trust Act”).

Section 3 of Trust Act defines a “Trust” as an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.

Private Trusts:

A private trust is created for the benefit of specific individuals i.e., individuals who are defined and ascertained individuals or who within a definite time can be definitely ascertained.

Private trusts may also be used as a collective investment pooling vehicles such as mutual funds and real estate investment trusts.

 Public Trust:

Public trust is created for the benefit of an uncertain and fluctuating body of persons who cannot be ascertained at any point in time, for instance; the public at large or a section of the public following a particular religion, profession or faith.

Public trust is generally a non-profit venture with charitable purposes and in such cases, it is also referred to as the charitable trust. A trust created for religious purposes is termed a religious trust and it can be either a private or public trust.

Who can form a Trust?

A Trust can be formed –

By any person competent to contract –

(i) above 18 years of age;

(ii) of sound mind;

(iii) not disqualified from entering into any contract by any law.

Discretionary Trusts:

A discretionary trust is a trust that has been set up for the benefit of one or more beneficiaries, but the trustee is given full discretion as to when and what funds are given to the beneficiaries.  

     Non-discretionary Trus

ts:

   A trust in which the trustee has no ability to make investment decisions with regard to the assets in the trust and/or has no control over when and how the assets are distributed to the beneficiary.

     Revocable Trust: 

A trust that can be revoked (canceled) by its settlor at any time during this life.

     Irrevocable Trust: 

A trust will not come to an end until the term/purpose of the trust has been fulfilled.