The Indian Trust Act of 1882 governs private trusts.
What are excluded under The Indian Trust Act?
Waqf, Property of a Hindu Undivided Family, Public or private religious as a charitable endowment, and other entities.
What is a private trust?
A private trust is a body formed for the benefit of one or more persons who are generally members of the family, friends or any individual. A trust is simply a transfer of property from the owner to a second party for the benefit of the third party.
For example, A transfers his land to his sister B for the benefit of his grandchild X.
The property may not necessarily be immovable. It could be cash, gold, bonds, shares, or other valuable assets. A Trust should not be created for an unlawful object. Section 4 of the Act defines unlawful trusts.
Who can create trust?
A private trust can be established by anybody of legal age (18 years ), of sound mind, and not barred by law. An individual, a corporation, an enterprise, a community, or a group of people may also create trust.
In the case of a juvenile for whom the court has appointed a guardian or whose property has been taken over by the court of wards, the age of majority is twenty-one years. A trust can also be established by or on behalf of a juvenile with the consent of a principal civil court of original jurisdiction.
Parties involved in the creation of a trust
Author/Settlor/Trustor/Donor: The person who wishes to transfer his property and places his faith in another to establish the trust.
Trustee: The person who accepts the confidence to establish trust.
Beneficiary: The person for whose benefit the trust is created.
Registration of a private trust
A trust deed must be drafted and executed in order to construct a trust (if the trust is formed during the trustees’ lifetimes), and a trust can also be created through a will.
The following aspects should be mentioned in the trust agreement or will:
- The purpose of building trust
- The intention behind the creation of the trust
- Names of beneficiaries
According to Section 5 of the Act, with regard to:
Immovable property: A private trust must be established in writing using a non-testamentary instrument. Furthermore, the non-testamentary document must be signed and registered by the author of the trust and the trustee. Registration is not required if a will forms the non-testamentary instrument.
Moveable property: The movable property can be transferred to the trustee or by declaring a trust in favour of the trustee. As a result, registration is not required.
Documents required to register a Private Trust
- Copy of the original trust deed.
- ID and Address Proof and the Settlor’s Passport-Sized Photo ID and Address
- Proof and the Photographs of the Two Trustees Proof of identification and address, as well as two witnesses’ passport-sized photos.
- Any document that is not testamentary must be signed by the author.
- Each trustee’s information, including evidence of identification and residence.
- Original registration certificates that have been confirmed.
- Registration certificate for income tax returns in Xerox format.
The procedure for registering a private trust is as follows
- A trust deed must be prepared on the necessary amount of stamp paper, and stamp duty must be paid to register the transaction under the Indian Registration Act.
- The trust paperwork must include the trust’s name, address, trust type (movable or immovable property), two trustees, the settlor’s name, and the trust’s character (charitable or religious).
- If you leave your property to the trust in your will, no stamp duty is due when the property is transferred to the trust.
