What exactly is trust?

A trust is a legal vehicle that allows a third party, known as a trustee to operate and manage trust fund assets on behalf of a beneficiary. A trust expands your options for controlling your assets, whether you want to protect your wealth from taxes or pass it on to your children.

What Are the Advantages of Trust Formation?

Participate in Charitable Activities

A Charitable Trust is primarily a way to structure your assets so that they benefit you, concerned beneficiaries, and a charity all at the same time. A Trust like this could provide a number of benefits to someone looking to help society with non-essential assets like stocks or real estate.

Tax Exemptions Are Available

The Income-tax department provides several tax exemptions to all registered trusts in India. Because the purpose of the Trust, unlike NGOs, does not revolve around profit generation, they are eligible for various tax breaks. However, this benefit is only available to trusts that have a registered deed.

Trusts are extremely useful in ensuring capital and income tax relief. The Trust may provide better protection from stringent tax provisions for the settlor, beneficiaries, and trust assets.

Give Financially Dissatisfied Individual Benefits

Through charitable activities, the registered Trust provides much-needed financial assistance to the poor and the masses.

Experience Few Legal Obstacles

The Indian Trusts Act of 1882 provides the Trust with comprehensive legal protection. It also prevents any third party from making an unnecessary claim that could jeopardise Trust’s legal standing.

Ensures Legal Coverage for the Family The Family Wealth Trust can be used to allocate specific assets such as land/an interest in the entity formed by the family that would otherwise be impractical for a trustee to split between individuals.

Avoid the Probate Court

In the absence of a Will, anyone can use trust registration to transfer an asset to an heir.

Because the legal title to the assets passes from the settlor to the Trustee when they are “settled,” there is no change in ownership after the settlor’s death, avoiding the need for probate of a will on account of trust assets.

The use of a trust can also help to avoid the economic hardship that many surviving spouses face while waiting for probate. Family Immigration/Emigration

When an individual and his or her family relocate to another country, it is an ideal time to establish a trust to avoid taxation in the destination country, thereby protecting the family assets and facilitating flexibility in its organisation.

What Are the Different Kinds of Trusts?

In India, there are three types of trusts:

●     The Public’s Trust

●     Personal Trust

●     Public-Private Partnership

While private trusts are governed by the Indian Trusts Act of 1882, public trusts are divided into religious and charitable trusts. Some of the prominent statutes for the enforcement of public trusts in India are the Religious Endowments Act of 1863, the Charitable and Religious Trust Act of 1920, and the Bombay Public Trust Act of 1950.

Personal Trust

A private trust is a legal arrangement established for the benefit of individuals as opposed to a public or charitable purpose. It is established for the financial benefit of one or more known to the Trustor beneficiaries. Private Trust does not have a charitable purpose, and its benefits are only available to those who have been designated as beneficiaries. The provisions of the Indian Trusts Act of 1882 must be followed by such trusts.

The Public’s Trust

A Public Trust primarily benefits the general public. Unlike private trusts, public trusts are not governed by the Indian Trusts Act and are established for charitable or religious purposes. Such a Trust follows the general law that is currently in effect. These trusts, like private trusts, can be formed inter vivos by will.

Public-Cum-Private Partnerships

The Public-Cum-Private Trusts, as the name implies, serve two functions. They can use their earnings for both public and private purposes. This implies that the Trust’s beneficiaries could be either public or private individuals, or both.

Documents Required

●     Charitable trusts are established under the Public Trusts Act of 1882.

●     A minimum of two people over the age of 18 in the case of females and 19 in the case of males with a sound mind and any or no educational qualifications are required.

●     Employees of the government and semi-government are also eligible to serve as trustees of trust. They gain no profit, salary, or personal gain from the public trust and provide selfless social services to the Trust.

●     Aadhar and PAN Cards (Original and Self-Attested Copies) are required, as well as Water/Electricity bills in their name or in the name of the property’s owner, and the owner’s permission/consent letter to open the Registered Office of Trust (NGO).

●     If the property is being rented, a rent agreement, two witnesses, one of whom must be a registered lawyer, and two passport-sized photos are also required.

●     The Trust Deed must be signed and submitted in the Sub-Registrar office of the concerned District Court of the respective area/district.

The Trust Registration Procedure

Step 1: Choosing a Name

• The first step is to choose a unique name for your trust, the name should not violate or infringe on anyone else’s name or trademark.

Step 2: Deed Drafting

• The trust deed must be drafted with the settlor (author of the trust deed), the trustee, and the beneficiary as the parties.

Step 3: Establishing a Trust

• A trust deed is a legally binding document that must be filed with the registrar.

              Step 4: PAN, TAN, and Bank Account

• Following the registration of the trust, the next step is to apply for the allocation of a PAN Number and TAN, followed by the opening of a bank account.

Trust Registration in India: Frequently Asked Questions

1.  How many different types of trust registration are there?

To establish a Trust, a Trust deed can be used. There are now two types of trust in India: public trust and private trust.

2.  What is the point of having trust in the first place?

Trusts are established to provide legal protection for the Trustor’s assets, to ensure that those assets are properly delivered to the intended beneficiaries, and to avoid or reduce inheritance or estate taxes.

3.  How do I establish a Trust for income tax purposes?

To obtain registration under Section 12A, fill out Form 10A, Application for Registration of a Charitable or Religious Trust.

4.  What is the procedure for closing a Trust?

‘Trust’ is usually unbreakable. With the court’s permission, the Trust can be combined with another Trust with identical objectives for reasons such as disqualification of Trustees, absence of Trustees, or mismanagement of the Trust.

5.  Is there a Trust Registration certification?

A certificate is not required for a Trust Registration. Registering the Trust Deed with the appropriate authorities, on the other hand, would suffice.