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A Private Trust, as the name denotes, functions for the benefit of individuals rather than for the welfare of the general public or for a charitable purpose. A Private Trust is created for the financial benefit of one or more designated beneficiaries. Under the Indian Trusts Act, an author can create a trust with his own personal property. The author of the trust can designate one or more persons as trustees on certain terms and conditions. Apart from an individual, a company, firm, society or association of persons also is capable of creating a Private Trust.
A person who is of the age of majority, is of sound mind and not disqualified by any law can create a Private Trust. A trust can be created by or on behalf of a minor as well, with the permission of a principal civil court of original jurisdiction. The Indian Majority Act 1875 holds that a permanent citizen of India attains the age of majority on completion of 18 years. However, in the case of the minor for whom a guardian is appointed by the court, the age of majority is 21 years
Constructive and systematic mode of managing and passing of family assets is one of the main benefits of Private Trust. Private Trusts can negate the prospect of family disputes, as well. Trust is designed to protect assets of a group or family against claims and creditors. When assets of a group or family are in a trust, the assets are owned by the trustees, for the benefit of group or family members.
Types of Private Trust:
Private Trusts are classified into two:
1. Specific trusts : the individual shares of the beneficiaries are known and ascertainable
2. Discretionary Trust: No individual shares of the beneficiaries are mentioned in the deed and income is distributed to them at the discretion of the trustee.
The Main Parties in a Trust
1. Author: The person who wants to transfer his property and rests confidence on another for the creation of the trust. An author is also known as Settlor, Trustor or Donor.
2. Trustee: The person who accepts the confidence for the formation of the trust
3. Beneficiary: The person who will benefit from the trust in the near future.
A trust should get registered u/s 12A of the Act with the Commissioner of income tax and the Private trust is not exempted from Income Tax as that of a Public Trust.
A private trust, which has versatile property, need not be registered. However, a private trust with immovable property requires registration under the Registration Act 1908. Following are the steps to registration:
Choosing an appropriate name for the Trust is the initial step to registering a Trust. The proposed names should be devoid of anything that suggests patronage by the Government of India or any State Government. Names that are prohibited under the ‘Emblems and Names Act 1950’ cannot be proposed either. However, names that are already registered as a Trust can be availed; there is no interdict in this regard.
The MoA and Rules and Regulations applicable to the Trust is known as Trust deed. Trust deed is crucial to the legal existence of a Trust. Preparing the trust deed stating the names and addresses of the trust, trustees, specifics of the registered Office, objectives, rules & regulations and beneficiaries, is the next step. The Trust deed will be submitted to the local Registrar.
Once all the submission formalities are completed, and upon the verification of the submitted documents by the Registrar, the registration certificate will be granted.
(Any one)
(Any one)
For Company in Registration:
Authorization from the owner or authorized occupant of the premises.
Utility Bill in owner’s name.
1. Conveyance/ Lease deed/Rent Agreement
2. Copy of the utility bills
3. NOC from Landlord
A Private Trust functions for the benefit of individuals where as a Public Trust aims for the welfare of the general public or a charitable cause.
In discretionary trusts, the person managing the trust chooses who can benefit from the trust and how much money the beneficiary is entitled to receive. But in a Specific Trust, the entitlement of the beneficiaries is fixed by the settlor at the time of settlement of the trust.
A trust can be created by or on behalf of a minor, with the permission of a principal civil court of original jurisdiction.
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