Indian Trusts Act: An Overview

There is a widespread belief that trusts can only be formed by the most affluent members of society. That is not true, though! Even ordinary people like men and women may establish a trust. High-net-worth folks are not the only ones who can do this. Only private trusts are governed by the terms of the Indian Trust Act of 1882. State-specific laws are typically used to regulate public trusts. For instance, the 1950 Maharashtra Public Trust Act. All of India is covered under the Indian Trust Act, with the exception of Jammu & Kashmir and the Andaman and Nicobar Islands. Furthermore, the Waqf, benevolent endowments, and a few other entities are exempt from this statute.

What is a Trust?

A trust, put simply, is nothing more than the transfer of property from the owner to a second party, in which the owner has faith, for the benefit of a third party is known as a trust.

Property refers to more than simply real estate. It may be money, stocks, or any other kind of valued item. The "instrument of trust" or "trust deed" is the legal document that declares or establishes the complete trust.

Parties under the Act

The parties under the act are

• Author/Settlor/Trustor/Donor − The individual putting their faith in another to transfer their property and establish the trust.

• Trustee − The individual who consents to the establishment of the trust.

• Beneficiary − The individual who will soon gain something from the trust.

Objectives of the Act

The main objective of the act is that the trust should be established for a legitimate reason, as per the main goal. For instance, the trust would be null and void if Mr. X had stolen money from a bank and handed it to Mr. Y with the aim of delivering the money to underprivileged children.

According to Section 4, all intents are considered to be legal unless they

• Are prohibited by law that violates the rules of the law

• Is dishonest

• Involves harming another individual or his property

• Unlawful or incompatible with public policies

Trust under the Act

A trust may be created by

• Anyone who is able to enter into contracts may form a trust. This encompasses an individual, an AOP, a HUF, a business, etc.

• A Principal Civil Court with original jurisdiction must provide its approval before a trust can be established on behalf of or in the name of a minor.

• Additionally, it depends on the current legal framework in place at that specific moment as well as any potential property disposition plans the trust's creator may have.

Rights and Power of Trustees under the Act

The following are the provision for the rights of trustees

Provisions	Description
Section 31	Right to title-deed
Section 32	Right to reimbursement of expenses
Section 33	Right to indemnity from gainer by breach of trust
Section 35	Right to settlement of accounts
Section 37	Power to sell in lots, and either by public auction or private contract
Section 38	Power to buy-in and re-sell
Section 39	Power to convey
Section 41	Power to apply property of minors, etc.,
Section 43	Power to compound, etc.
Section 44	Power to several trustees of whom one disclaims or dies.

Types of Trusts

There are two types of trusts under the act i.e.,

• Private Trusts − A private trust is for a private forum. In other words, it is possible to identify the recipients. For instance, a trust is established for the author's friends and family.

• Public Trusts − The public at large is the target audience for a public trust. For instance, charitable institutions are run by non-profit organizations.

Benefits under the Act

Following are the advantages of creating trust under the Act

• For the goal of allowing the settler to express his or her sentiments for charitable/religious reasons of reducing human suffering, promoting public good, advancing research, etc. in a proper and controlled manner, a trust can be formed.

• A charity or religious trust is eligible for a number of tax breaks and benefits.

• The donor's taxable gains may be used to offset contributions to the qualified charitable organizations.

• To ensure the wellbeing of family members and other relatives who are reliant on the settler, a trust might be established.

• The settlor of a trust can use a trust to prevent the transfer and division of his or her assets to third parties.

Conclusion

In conclusion, it is reasonable to believe that the beneficiary is equally liable for any infractions as well as entitled to certain rights under the terms of the Indian Trusts Act. The beneficiary's privileges and obligations are in balance. This analysis also shows that, in order to protect himself from any breach of trust, the receiver must maintain strong collaboration with the trustee.

Frequently Asked Question

Q1. What is the purpose of trust in India?

Ans. Formation a trust in India, has various purposes such as, but the underneath purposes behind all those purposes are working for the welfare of the society at large (especially focusing on deprived class) and to look after someone’s property. But, the Indian Trusts Act, 1882, states that a trust cannot be created for any unlawful purposes.

Q2. What are the documents required for creating a trust?

Ans.

• Pan card and AAADHAR (original with the self-attested copies).

• If the property is self-occupied, water and electricity bills must be in their own name.

• If the property is rented, the rent agreement must be accompanied by a NOC from the landlord.

• In accordance with the revenue department act of the relevant district court, the trust deed must be signed and submitted in the office of sub-registrar.

Q3. What is the procedure for creation of a trust deed?

Ans.

• A formal deed on stamp paper with the estimated trust value should be drafted in order to register a trust.

• Send the trust deed and a copy of the deed to your local registrar to be registered.

• The settler, two witnesses, and the original identity evidence must all be present at the moment of registration.

• The original registered copy of the trust deed is given back while the registrar keeps the photocopy.

Q4. What type of trust is not governed by the Act?

Ans. Public trusts are those that are established for the benefit of the general public or in situations when the recipient is unable to make informed decisions. The Charitable and Religious Trust Act of 1920, the Religious Endowments Act of 1963, the Societies Registration Act of 1860, etc., are essentially the laws that regulate these trusts, however not under the Indian Trust Act of 1882.