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
Wealth Management Commitment is never casual…
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
Wealth Management Commitment is never casual…
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.
Wealth Management Commitment is never casual…
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
Wealth Management Commitment is never casual…
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”
Wealth Management Commitment is never casual…
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
Wealth Management Commitment is never casual…
Creation of Trust
Subject to the provisions of Section 5, a Trust is created when the Author of the Trust
writes
a) An intention on his part to create thereby a Trust,
b) The purpose of the Trust,
c) The Beneficiary, and
d) 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
Wealth Management Commitment is never casual…
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
Wealth Management Commitment is never casual…
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
Wealth Management Commitment is never casual…
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
Wealth Management Commitment is never casual…
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
Wealth Management Commitment is never casual…
Important Information
The information and opinions contained in this document have been compiled or arrived at from sources believed
to be reliable and in good faith but no representation or warranty, express or implied, is made by Verdant Financial
Advisory Services Pvt. Ltd. All opinions expressed herein are subject to change without notice. You should make
an independent assessment, of the appropriateness of any investment in the light of your own objectives and
circumstances, including the possible risks and benefits of the investment. This document is for information
purposes only, descriptions of any company or companies or their securities herein are not intended to be
complete and this document is not, and should not be construed as, an offer to buy or sell any security.
Wealth Management Commitment is never casual…