There is a widespread belief that the most affluent members of society can only form trusts. That is not true, though! Even common people can establish a trust. Only private trusts are governed by the terms of the Indian Trust Act of 1882 (referred to as “The Act” in this article). For instance, the 1950 Maharashtra Public Trust Act. India is covered under the Indian Trust Act, except Jammu & Kashmir and the Andaman and Nicobar Islands. Furthermore, the Waqf (Islamic relief) and a few other entities are exempt from this act.
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Let’s use an illustration to assist you in comprehending this.
For the benefit of his little granddaughter, Mr. X intends to leave Mr Y the bungalow (property). Because of his confidence in Mr Y, Mr. X transfers his property to him. This is the very foundation of trust . A trust, put simply, is nothing more than the transfer of property from the owner (Mr X) to a second party (Mr Y), in which the owner has faith, for the benefit of a third party (Granddaughter of X). Property refers to more than just real estate. It might be money, stocks, or any other valued item. The “instrument of trust” is the document’s name that declares the full trust.
The trust should be established for a legitimate purpose, according to the main goal. For instance, the trust would be null and void if Mr. X had robbed a bank and given the money to Mr. Y to give it to less fortunate kids.
So how can we truly determine whether the goal is legal or illegal? Section 4 of the Act has the answer. According to Section 4, all purposes are considered legal unless they: Legally prohibited; violate legal requirements; are dishonest; involve harm to another person or his property; are immoral or against public policy.
Anyone with the legal capacity to enter into contracts, such as an individual, an AOP, a HUF, a firm, etc., may establish a trust. If a trust is to be established by a minor or on their behalf, the original jurisdiction of a Principal Civil Court must grant its approval. It also depends on the laws in force and the extent of the trust’s creator’s intended property dispositions.
According to Section 5 of the Act,
Generally speaking, trusts can be designed to serve one or more of the following objectives:
A trustee can be someone competent to manage assets. A person is not required to take up the role of trustee, though. Since it is the trustee’s responsibility to carry out the fund’s purpose, they must clearly define that aim in both words and deeds.
Yes. A trust can be created for various reasons, such as helping the author pay for medical care or looking out for the kid’s wellbeing. However, a trust cannot be established for any illegal objectives, according to the Indian Trusts Act of 1882.
The name clause, registered office clause, and other terms and conditions are just a few of the clauses that make up a trust deed.
The benefits of creating a trust are as follows:
India has a statute governing private trusts and trustees known as the Indian Trusts Act 1882. The Act defines what is legally referred to as a trust and specifies who is eligible to serve as its trustees. The Act was revised by the Indian Trusts Amendment Bill of 2015, which also lifted various limits on the trust’s ability to invest its financial assets in particular types of investments. However, it also allowed the government to examine the trusts’ investments randomly. Vakilsearch also provides assistance and knowledge regarding Indian Trust Act, its registration and the taxation process.
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