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What is Trust ?

Indian Trusts Act, 1992 is a law in India relating to private trusts and trustees. The Act defines what would lawfully be called as a trust and who can legally be its trustees and provides a definition for them. The Indian Trusts Amendment Bill of 2015 amended the Act and removed some restrictions on investment of the monetary assets by the trust in certain investments. But at the same time, it enabled the government to scrutinize the trusts' investments at will.

The Act defines how the author of the trust could create a trust and assign trustees and assign his monetary assets to be controlled by the trust.

As a formal agreement, a trust agreement usually takes the form of a contract. In this contract, a trustor confers the ownership rights of one or more assets to a trustee. The document typically details why this transfer is taking place, which is often for the purpose of conservation or protection of assets.

At its most basic, a trust agreement defines the purpose of establishing the trust, the terms that must be fulfilled to terminate the trust and the full details of the assets placed in the trust. It also spells out what powers and limitations the trustees hold and what sort of provisions may affect them, as well as any compensation the trustees may receive.

Benefits of trust registration


1. Asset Protection

Trusts can be one of the most effective ways of protecting assets. In simple terms, assets transferred to a trust no longer form part of the Settlor’s property, so the trust assets cannot be seized if a Settlor gets into financial difficulties. This is an oversimplification of the law. Under certain circumstances, the transfer into trust may be set aside and a court may order the trust assets to be transferred back to the Settlor.

2. Tax Planning

Assets transferred into trust are no longer considered as belonging to the Settlor, so the income and capital gains generated by those assets are taxed according to the rules governing the legal owner – the Trustee. Inheritance tax would be eliminated because the Trustee would continue in existence despite the death of the Settlor. Anti-avoidance legislation in the home country of the Settlor, or in the location of the trust assets, may seek to counteract this outcome but a correctly structured and administered trust should produce substantial tax savings.

3. Confidentiality

Proving a will is a public procedure. The tax authorities will need to receive a complete list of all the property owned by the deceased in order to assess the amount of estate duty payable before the property can be transferred to the executors who may then distribute to the legal heirs according to the will. This procedure is entirely unsuitable for those who wish to keep details of their assets confidential. The only other legal form of transfer is via a trust and this would generally save estate duty and keep the trust assets confidential.

4. Avoiding Forced Heirship

Many continental European countries, civil law jurisdictions and countries of Islamic tradition have “forced heirship” provisions, which prevent the deceased from leaving his property to whomever he wishes. Typically one-third of the estate must be left to children, one-third to the spouse and the other third is the free estate that may be left to anyone else. If that course of action doesn’t appeal, a trust will frequently be the answer because it will allow a wider or different distribution of the estate.

Documents Required for Trust Registration


Trust Deed on stamp paper of requisite value.

One passport size photograph of two trusteed.

One passport size photograph of settler.


Proof of identity of the settler

Office address proof/NOC.

Proof of identity of each of the two trustees.

One passport size photograph of each witness.

Proof of identity of each of the two witnesses.

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PACKAGES


Basic

14999 /-
Inclusive all taxes

Drafting of Trust Deed
Registration of Trust
Pan Card of Trust
TAN Number of Trust

Premium

19999 /-
Inclusive all taxes

Drafting of Trust Deed
Registration of Trust
Pan Card of Trust
TAN Number of Trust
Bank A/C opening support
GST registration
GST return filing For one quarter

Standard

16999 /-
Inclusive all taxes

Drafting of Trust Deed
Registration of Trust
Pan Card of Trust
TAN Number of Trust
Bank A/C opening support
GST registration

Procedure for Trust Registration

1

Creation of Deed

The primary step in registering as a trust is the creation of the Deed with the above mentioned proceedings.
2

Creation of will

The Will must be created on the which how the properties are handled from the name of the author and the transferring procedure to the trustee.
3

Registering of the Deed

The deed is registered under the Act and the trust would be established after the verification and validation of the property and the deed.

Types of Trusts in India


Public Trusts :

  • A public trust is created with a goal to serve for the general benefits for the good chunk of general public. It can be divided into public charitable and public religious trust where as the name suggests the specific purpose would be done with the property..

Private Trusts :

  • In terms of the private trusts the beneficiary is pre-determined that is the individual or the family are determined who would be benefited from the properties and the resources under the trust’s name.

Persons involved in the Trust

An Author or Settlor of the Trust - A person who incorporates the trust with the property of his own for the benefit of the others.

The Trustee - The person who is responsible for the maintenance and the proper reach of the resources to the right people in need is the Trustee.

The Beneficiary - The end person who is in need and is actually benefited from the activities of the trust.

Mandatory Requirements for the trust registration


  • Intention of the trust must be defined properly.
  • The way and the purpose of the trust must be discussed and put forward.
  • The trust property must be listed.
  • If there are any transferrable the needs are to be addressed.
  • The format cannot be revoked and unless it is mentioned in special clause so confirmation has to be made before the proceedings.

Important things included in Trust Deed

Name(s) of the author(s)/settlor(s) of the trust.


Name(s) of the trustee(s).


Name(s) of the beneficiary ,if any


Proposed name of the Trust.

Place where its principal and other offices shall be situated.

The property that shall devolve upon the trust for the benefit of the beneficiary.

The objects of the trust.

The manner of appointment, removal or replacement of a trustee, their rights, duties and powers etc.

The rights and duties of the beneficiary.

FAQ About Trust Registration

  • What is a trust ?

    A trust is a legal rights given to someone under the confidence that they are holding the property for the benefits of the others and not them. The trusts are not clearly defined in the Indian law but they are defined in the 1961 Income Tax Act.
  • What are the types of Trusts ?

    1. Public Trust - They are for the benefit of general public.
    2. Private Trust - The beneficiary are pre determined for the establishment.
  • What is a deed ?

    Legal document by which an asset owner transfers his or her right of ownership in an asset to another party . To be enforceable, a deed must state on its face that it is a deed,accurately describe the property which is the subject matter of the deed, be validly signed (executed) in presence of the prescribed number of witnesses, and be handed over to the grantee as a deed.
  • What is the minimum number of persons are required to form a Trust?

    Minimum 2 Trustees are required to form a Trust.
  • How a Trust differ from Society?

    Trust governed by the Indian Trust Act, 1882 while Societies governed by Societies Registration Act, 1860. Minimum 2 Members are required for Trust while for Society minimum 7 Members are required. Trust Deed can be altered by supplementary trust Deed while in case of Socities Both Memorandum as well as Rules and Regulations needs to be altered.
  • Who can be a trustee?

    A Trustee can be any person, that is an individual or corporate body or a corporate sole, having separate Legal entity.
  • Who is settler?

    If the trustee dies, or is no longer able to act as trustee, the appointer is the person that provides a replacement. They’re also responsible for determining whether the trustee gets paid for their assistance running the trust.
  • Who is Appointer?

    A settlor is a person that puts the first property into the trust (known as settlement/gift and usually for a nominal sum of $10). They need to be unrelated to the trust and not to receive any benefit from it. Typically, you could use a lawyer, accountant or friend.
  • Can a Trustee also be a benefciary of a Trust?

    Yes, a trustee can be one of the beneficiaries of a trust. For example, an individual could set up a trust, appoint themselves as trustee and distribute income to their family. However, a trustee cannot be the sole beneficiary of a trust. This is because they would be legally owning property for the benefit of themselves, which is problematic from a legal perspective.

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