Process Of Starting Trust In India

INTRODUCTION

A trust is an obligation or a kind of responsibility that has been placed upon one who shows confidence or authority. It is a confidence reposed in a person conveying to him the legal title to the property which he is to hold for the benefit of others. Therefore it is the trustee whose responsibility includes protection of rightful ownership in the trust property, preservation of trust property and channelizing the income from the trust property in accordance with the intention of the creator of the trust. Or in other words we can say that a trust is a relationship that is created by an individual in which more than one person hold’s an individual property to use and protect it for the benefit of others. An individual can create and control the distribution of their property during their lives or after their deaths through the use of trust.

WHAT IS TRUST

The Indian Trust Act 1882 defines trust as an obligation to annex the ownership of the property arising out of the confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of other and the owner. Basically a trust has also been considered as an instrument which is used for safeguarding the beneficiaries especially when beneficiary is minor or is not capable enough to protect their interest. The person who creates trust is known as settler and the person who holds the property for another’s benefit is called trustee. The person who is benefited by the trust is the beneficiary.

• The person who reposes or declares the confidence is called the owner or 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 ‘Beneficiary’
• The subject matter of the trust is called ‘Trust money or trust property’.
• The instrument by which trust is declared is called ‘trust deed’.

WHO CAN CREATE TRUST

As per section 7 of the Indian Trust Act 1882, trust may be created by the following person.

• Person competent to enter into contract under section 11of Indian Contract Act 1872
• On the behalf of minor with the permission of the court
• Hindu undivided family
• Company
• Association f person

ESSENTIAL ELEMENTS FOR THE TRUST FORMATION

1. CREATION OF TRUST: A trust is created when the author of the trust indicates with reasonably certainty by words or by acts

• An intention on his part to create the trust.
• The purpose of the trust
• The beneficiary
• Trust property

A trust can be created by word or by act and no formal language is necessary to constitute effective declaration of trust, but the language used must be certain

• That the settler indented to constitute a trust binding in law on himself or the person to whom the property is given
• He must be intended to bind definite property by the trust,
• He must be intended to benefit a definite person or persons in a definite way.

2. LAWFUL PURPOSE: Trust must be for lawful purpose. Section 4 of the India Trust Act, 1882 defines lawful purpose in the following words:

“A trust may be declared or created for the lawful purpose unless it is:

• Forbidden by law,
• Is of such nature that if permitted it would defeat the provision of any law
• Is fraudulent
• Involves or implies injury to the person or property of another
• The court regards it as an immoral activity or oppressed to the public policy.

Every trust of which the purpose is unlawful is void. And where the trust is created for two purposes of which one is lawful and other is unlawful and the two purposes cannot be separated the whole trust is void.

3. TRUST DEED: a trust can be formed by words or act and there is no requirement for a trust deed. But however a trust deed is desirable and required in certain cases. When a private trust pertains to the immovable property a written and well executed trust deed is required and shall also be required to be registered. In case of public trust for immovable property a written trust deed is not mandatory but desirable. in relation to the movable property a mere simple delivery of possession with direction that the property be held under trust is sufficient and there is no requirement of any documents or deed.

PROCEDURE FOR CREATING PUBLIC TRUST

The procedure for forming public trust is different from that of private trust as both are governed by different laws. Creation of public trust is governed by the laws of the centre. A Public trust can be either formed as a trust society or as under section 8of the Companies Act 2013. It generally depends upon the form of trust when it is instituted or formed primarily by one or more persons.

PROCEDURE FOR CREATING PRIVATE TRUST

For the creation of private trust the first and foremost requirement is that the author of the trust must express with reasonably certainty his/her intention in words or by act to create a trust. Where a trust is declared by words the language must be clear enough to show his intention to create trust. Thus, the author of the trust has to comply with certain conditions mentioned under:

1. The author intent to constitute a trust is binding in law on the person to whom property was given.
2. The author intended to bind definite property by the trust.
3. The author intended to benefit a definite person or person in a definite way.

CONCLUSION

Trusts are formed for various purposes and can be proved to be an effective vehicle in the further process of succession and in estate planning. Trust is a concept which revolves around three parties namely as Author, beneficiary and trustee which have respective rights and legal obligations to perform as assigned to them by way of trust deed with relation to the trust property.