What is a Trust?
A TRUST is defined as a fiduciary relationship between the trustee and a trustor. In a trust, the Trustor is the party that gives the right to another party (‘The Trustee’) to hold title to property or assets for benefit of a third party (‘The Beneficiary’). Trusts are generally incorporated or established in order to provide legal protection for the assets of the trustor, to ensure that those assets are distributed or applied in accordance with the wishes of the trustor, and to save time, minimalize paperwork. In some cases, trusts are also established to avoid or reduce inheritance or estate taxes.
A trust deed, which is a binding legal agreement between the settlor and the trustee, is legalised by the registrar of the relevant state through the trust registration process. The Trust acts as a formal vehicle responsible for the equitable distribution of the settlor’s assets to the targeted beneficiaries. As soon as the registrar gives the trust deed his or her approval, the trust takes effect.
The term ‘trust ‘is defined as
➲ An obligation attached to the ownership of property and
➲ arising out of a confidence reposed in and
➲ declared & accepted by the owner or and accepted by him,
➲ For the benefit of another or of another and the owner.
DEFINITIONS
‘author of the trust’ is the person who responses or declares the confidence,
‘trustee’ is the person who accepts the confidence
‘beneficiary’ is the person, for whose benefit, the confidence or the trust is accepted;
‘trust property’ or ‘trusts money’ is the subject matter of the trust;
‘beneficial interest’ is the right of the beneficiary’s against the trustee as owner of the trust’s property;
‘instrument of trust’ is the instrument declaring the trust
In a legal sense, word trust has a technical and definite meaning which is very much different from the sense in which this word is used in daily parlance. It implies a legal concept or relationship similar to other relationships created by law, e.g., Contract, Agency.
Classification of Types of Trusts
There are several classes of trust divided according to the mode of their creation. Some of the prominent classes of trusts are as follows:
➲ Charitable or Religious Trust
Charity means piety/mercy/betterment/welfare something religious or divine, so charitable trust means a trust created for the charity of people or society.
➲ Express and Implied Trusts
Express Trust: This is one that is intentionally declared by the maker of a trust known as the settlor, or the testator, whether the trust is created by a will. It is one which the settler himself created through the manifestation of a desire to create one. It is a kind of trust where terms and conditions are clearly written in the instrument.
Implied Trust: These are trusts which court deduces from the parties’ actions and the transaction’s circumstances. For example, if a person decides to settle property for the benefit of another in return for valuable consideration, the other person immediately becomes a trustee of the property. It is a type of trust where terms and conditions are written but the intention is not clear but can be understood.
➲ Public and Private Trusts
Private Trust: A private trust is one that benefits particular persons irrespective of whether they are immediately ascertainable and if they don’t vest within the perpetuity period the interest defined therein will fail. It is a type of trust which is created for a group of people or for a family or particular
Public trust: A trust which is created for common people, for a charitable purpose, or for the welfare of society.
➲ Constructive Trust
It applies to an arrangement whereby a person who has obtained title to a property has an equal obligation to pass it to another person to whom it rightly belongs, on the grounds that obtaining or maintaining it is wrongful and would unjustly enrich the person if he or she is permitted to retain it.
Procedure for Registration of a Trust
➲ Preparation of Trust Deed:
It is not a mandatory requirement but it is desirable to have a Trust deed in place. It is also enforceable by law and provides an increased sense of security. Following details must be mentioned in the deed:
- Name and address of trustor (the one who set up the trust)
- Name and address of another trustee
- Address for correspondence & Evidence
- Name of trust
- Minimum and maximum number of trustee
- Registered office address of the trust
- Objective of trust
- Rule and regulation of trust