Formation of Private Trust

Introduction:

The concept of a trust has existed for centuries as a mechanism through which individuals dedicate property for the benefit of others. Historically, property has been set aside for charitable, religious, and welfare purposes such as dharmshalas, educational institutions, medical facilities, water tanks, wells, and temples.

Apart from public charitable trusts, a private trust may also be created for the benefit of specific individuals or a definite group of beneficiaries. Such trusts are commonly established for purposes such as family welfare, financial security of dependents, succession planning, care of minors, elderly family members, or persons with illness or disability.

In India, private trusts are primarily governed by the Indian Trusts Act, 1882, and where immovable property is involved, the trust deed must be registered under the Registration Act, 1908.

Definition of Trust

As per Section 3 of the Indian Trusts Act, 1882:

A trust is an obligation annexed to the ownership of property, arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.

In simple terms, a trust is created when a person (called the Settlor) transfers property to another person (called the Trustee) to hold and manage that property for the benefit of certain persons (called the Beneficiaries).

 

Essential Components of a Private Trust

For creation of a valid private trust, the following elements are necessary:

1. Settlor (Author of Trust) – The person who creates the trust and transfers the property.
2. Trustee(s) – Person(s) responsible for holding and managing the trust property.
3. Beneficiary(ies) – Person(s) for whose benefit the trust is created.
4. Trust Property – Property or assets transferred to the trust (movable or immovable).
5. Trust Deed – Written instrument specifying the terms and conditions of the trust.
6. Lawful Purpose – The objective of the trust must be lawful

Scope of Professional Services – Formation and Registration of Private Trust

1. Advisory Services

• Providing preliminary consultation regarding the concept, structure, and legal framework applicable to the formation of a Private Trust.
• Advising on the roles and responsibilities of the Settlor, Trustees, and Beneficiaries.
• Guiding the client on the legal provisions applicable.

2. Drafting of Trust Documentation

• Drafting of the Trust Deed incorporating the objectives, powers and duties of trustees, details of beneficiaries, administrative provisions, and other relevant clauses.
• Incorporating specific clauses based on the client’s requirements, including succession of trustees, management of trust property, and distribution to beneficiaries.

3. Assistance in Execution of Trust Deed

• Guiding the client regarding the appropriate stamp duty payable on the Trust Deed.
• Coordinating the execution of the Trust Deed by the Settlor and Trustees in the presence of witnesses.

4. Registration of Trust Deed

• Assistance in filing and registration of the Trust Deed with the jurisdictional Sub-Registrar office.
• Coordination for submission of required documents and completion of registration formalities.
• Follow-up with the concerned authorities for obtaining the registered Trust Deed.

5. Post-Registration Support

• Assistance in applying for Permanent Account Number (PAN) of the Trust.
• Guidance for opening a bank account in the name of the Trust.

6. Exclusions

The following services are not included in the above scope unless specifically agreed separately:

• Obtaining Income Tax registrations or exemptions (such as 12AB, 80G etc.).
• Accounting, audit, or ongoing compliance services of the Trust.
• Legal representation in case of disputes or litigation.
• Drafting of additional legal documents not directly related to the Trust Deed.

7. Client Responsibilities

The client shall provide all necessary information, documents, and confirmations required for preparation and registration of the Trust Deed, including identity proof, address proof, details of trustees and beneficiaries, and proof of the proposed registered address of the Trust.

 

ASSUMPTIONS:

In relation to the above scope of work, we have assumed the following:

• Our advice will be restricted to advise on Indian legal issues, and we will not be required to advise on laws other than laws of India.

 

REPORTING:

We shall report only to you and shall owe no responsibility or duty of care to any other party. Our services are for your benefit and may not be used or relied upon by anyone else without our prior written consent.

 

CONFIDENTIALITY:

All communications between the Parties shall be treated as confidential. We will keep confidential and not disclose to any third party any information or documents received from you, unless otherwise required to be disclosed by law and/or agreed between Parties. For the purposes of the foregoing, “Parties” shall mean you and LBA (“Ladda Bhutada & Associates”).

 

“Our priority is Client’s satisfaction and we believe in maintaining healthy and long-term relations with our clients.”

 

Kindly sign a copy of the letter/ or mail me at info@csladda.com in token of approval or you may issue separate letter accepting terms and condition of this letter.

Thanking you and assuring best professional services.

For Ladda Bhutada & Associates,

(Company Secretaries)

 

Pramodkumar R. Ladda

(Partner)