The Indian Trusts Act, 1882 (hereinafter referred to as ITA) is the statute that contains the laws relating to private trusts and trustees.

A trust, as defined in the interpretative clause (Section 3 of the ITA) is an obligation annexed to the ownership of property, and 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. The person who creates the trust or declares the confidence is called the author of the trust, and the one who accepts this confidence is known as the trustee. The person for whose benefit the trust has been created is known as the beneficiary of the trust. The subject matter of the trust is called trust property or trust money. It is mandatory for a private trust to be registered.

TYPES OF PRIVATE TRUSTS IN INDIA:

Private trusts in India may be discretionary and non-discretionary. The former is one wherein the share of each beneficiary is not fixed by the Settlor and the trustees, at their own discretion, have the power to determine the share of the beneficiaries in the trust property and who amongst the beneficiaries shall derive the benefit from the said trust property. A non discretionary trust is one wherein the benefit to be derived by the trust property is fixed by the settlor at the time of drawing up the instrument of trust.

A trust may be revocable-  which can be cancelled by the settlor at any time during his life, or irrevocable- a type of a trust which does not come to an end until the term / purpose of the trust as provided under the instrument of trust has been fulfilled.

DIFFERENCES BETWEEN TRUSTS AND WILLS:

Section 2(h) of the Indian Succession Act defines will as the legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death. Therefore, as the definition suggests, a will only becomes applicable after the death of the person. A trust on the other hand, is applicable as soon as it is executed. It can operate during the lifetime of the author of the private trust.

BENEFITS OF PRIVATE TRUSTS:

Private trusts are often used by businessmen and industrialists. This is due to the fact that assets that come under private trusts cannot be attached by creditors. In cases where loans from banks involve personal guarantees and where assets are as stake, people could use private trusts to protect their assets.

The private trust structure also helps in management of the assets. Moreover, it ensures that the assets are taken care of in the event that the author of the trust is not there.

By executing a private trust the author is in control of the assets, and can ensure that they are distributed among the beneficiaries according to their wishes. Moreover, the author is not losing their control over the assets. This will also help in avoiding unnecessary court cases and problems of getting a probate and thus leads to cost savings too.

REFERENCES:

https://www.goodmoneying.com/private-trust-protect-manage-distribute-estate/

https://www.firstpost.com/business/money/how-revocable-trusts-work-decoding-its-advantages-and-disadvantages-1976203.html

https://www.mondaq.com/india/trusts/876980/trusts

https://taxguru.in/income-tax/private-trust-india.html

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