Trust & Trust Registration – An Overview

Individuals establish trusts to allocate a portion of their assets or property for the benefit of another person. A trust is a fiduciary relationship involving the trustor, trustee, and beneficiary. The involved parties are outlined in the trust deed when applying for registration for trust creation.

A trust is established when the trustor transfers a specific asset or property to the trustee for the ultimate benefit of the beneficiary. The beneficiary, who is typically a third party, may have a connection to both the trustor and the trustee.

According to the Indian Trusts Act of 1882, a trust is defined as a “Relationship between the trustor and trustee to hold specific benefits for the beneficiary.”

Parties Involved in the Trust Registration Process

Trustor:

The trustor is the person who establishes the trust. They are typically the owner of the assets or property being placed in the trust.

Trustee:

The trustee is an individual or entity entrusted with the responsibility of managing and overseeing the trust. They hold and administer the trust property on behalf of the trustor and for the benefit of the beneficiary.

Beneficiary:

The beneficiary is the person for whom the trust is created. They are the intended recipient of the benefits, assets, or property held within the trust. The beneficiary can be a third party, known to both the trustor and trustee, and they are entitled to receive the benefits according to the terms and conditions of the trust.

Types of Trusts

Trusts can be classified into various categories based on the activities they undertake. Understanding these types is essential for navigating how to register a trust in India:

Public Trust:

Established to benefit the general public, often for charitable, educational, and religious purposes.

Private Trust:

Created for the benefit of specific individuals, families, or close associates.

Public Cum-Private Trust:

Serves both public and private purposes, benefiting both general and specific individuals.

Private Limited Trusts:

Governed by The Trusts Act of 1882, these are created for specific individuals or groups closely related to the trust’s founders.

Public Limited Trusts:

Created for broader public benefits and governed by specific statutes such as the Religious Endowments Act of 1863 and the Bombay Public Trust Act of 1950.

Regulatory Authority and Laws for Trust Registration

The Registrar of Trusts is the primary regulatory authority responsible for trust registration in India. Their role involves maintaining a comprehensive database of all registered trusts in the country. The registration process for private trusts is governed by the Trusts Act of 1882.

Public trusts in India must be registered with the relevant state authority as required by the applicable state act. Key laws regulating trusts include:

• Trusts Act of 1882: Governs the registration and administration of private trusts.
• Income Tax Act of 1961: Provides tax benefits and exemptions to registered trusts.
• Societies Registration Act of 1860: Regulates the formation and functioning of societies involved in charitable, literary, scientific, or artistic activities.

Reasons for Trust Registration

Obtaining charitable trust registration is necessary for several reasons:

• Ensures proper regulation of trust activities, ensuring compliance with laws and regulations.
• Promotes non-commercial activities in areas like arts, science, education, and the environment.
• Allows registered trusts to claim income tax benefits under sections 12A and 80G.
• Provides a license to conduct trust-related businesses within the legal framework.
• Contributes to the development of sectors like education, healthcare, social welfare, and the environment.

Benefits of Trust Registration

Trust registration offers several advantages to individuals and organizations:

• Charitable Involvement: Setting up a Charitable Trust allows individuals to benefit themselves, their beneficiaries, and their chosen charities.
• Tax Exemptions: Registered trusts in India can access tax exemptions provided by the Income Tax Department.
• Financial Support: Provides essential financial assistance to the underprivileged and the public through charitable activities.
• Legal Protection: The Indian Trusts Act of 1882 ensures comprehensive legal protection.
• Family Wealth Protection: Helps allocate specific assets, preserving and managing family wealth.
• Probate Avoidance: Enables the transfer of assets to heirs without probate.
• Immigration/Emigration Benefits: Mitigates taxation, safeguards assets, and offers flexibility in asset organization.

Registration Requirements for the Trust

To be eligible for a trust registration certificate, the following criteria must be met:

• A trust must be formed by at least two or more individuals.
• The trust must be established according to the provisions outlined in the Indian Trusts Act of 1882.
• None of the parties involved should be disqualified under any prevailing law in India.
• The objectives of the trust must not contravene any existing laws in India.
• The trustee must conduct their activities in a fair and just manner.
• The trust formation should not be contrary to the public interest or any other applicable laws.
• The trust activities must not cause harm to any individual.
• The trust activities should align with the objectives stated in the trust deed.
• If the trust has more than two purposes, both purposes must be valid.

Contents of a Trust Deed

A trust deed is a crucial document that outlines the key details and provisions of a trust. It encompasses the following clauses:

• Period or term for which the trust will remain in operation.
• The registered office address of the trust.
• The geographical area or region where the trust will carry out its activities.
• The goals and objectives that the trust aims to achieve.
• Information about the person establishing the trust (settlor) and details of the assets or property being transferred to the trust.
• Information about the board of trustees, including their membership, qualifications, terms, and tenure.
• The roles, responsibilities, and powers of the trustees.
• Procedures for amending the trust deed and provisions for the closure or termination of the trust.

Documents Required:

• Trust Deed with the respective stamp value.
• Two photographs of the parties involved in the trust.
• PAN cards of the individuals associated with the trust.
• Address proof of the individuals.
• Identity proof of the individuals.
• Authentication from the partners (if applicable).
• No Objection Certificate for using the premises (if applicable).
• Any form of a utility bill as proof of address.
• Address proof of the trust registered office.
• 12A Registration and 80G Certificates from the respective income tax authorities to claim deductions (if applicable).

Process / Procedure for Applying for Trust Registration

The procedure to register for trust creation and obtaining a trust registration certificate is explained in detail below:

1. Name of the Trust:
   • Choose an appropriate name complying with relevant acts such as Trademarks, Copyrights Act, Intellectual Property Rights Act, and Emblems and Names Act, 1950.
2. Settlers of the Trust:
   • Determine the individuals who will act as settlers. A minimum of two trustees is required. The author of the trust cannot be a trustee, and all trustees must be residents of India.
3. Prepare a Memorandum of Association for the Trust:
   • Prepare a Memorandum of Association (MOA) outlining the objectives and purpose of the trust.
4. Draft the Trust Deed:
   • Create a trust deed, a legally binding document establishing the trust. The trust deed must be presented to the registrar during the registration process.
5. Submit the Deed to the Registrar:
   • Submit the trust deed and other required documents to the registrar.
6. Obtain Trust Registration Certificate:
   • After reviewing the submitted documents, the trust will be registered, and the registrar will issue a trust registration certificate.

Winding Up a Trust

Winding up a trust occurs when all the trust’s properties/assets are distributed lawfully to the beneficiaries or a similar entity. The parties involved must address any tax obligations resulting from the asset transfer. Complying with the approval of the charity commissioner, court, or other applicable laws is essential to minimize the risk of legal disputes.

How Can EYC International Help in Securing Trust Registration?

At EYC International, our team of experts is committed to providing you with the necessary support for charitable trust registration and ensuring compliance. The registration process involves intricate legal implications that require careful attention. Our professionals ensure that you gain a deeper understanding of the governing provisions of trusts in India, enabling you to undertake trust-related activities with minimal legal hassles.

Contact us today to benefit from our expertise in establishing legally compliant and effective trusts!