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Trusts are a business structure created with noble intentions to promote the development of sciences, literature, and other worthy causes. They serve purposes such as alleviating scarcity, providing education to those in need, and offering medical support. Trust registration is officially registering a trust under the Trusts Act of 1882. This legal step ensures that the trust is recognized and operates within the framework of the law. Registering a trust provides legal validity and establishes its existence as a separate entity.
If you are contemplating the creation of a trust for non-profit or charitable purposes, trust registration is vital to ensure its effective operation and compliance with legal obligations. At Financial Tree Company , we have a dedicated team of professionals ready to support you every step of the way during the trust registration process. Our aim is to provide you with a seamless and efficient experience.
Contact us today to discuss your trust registration needs and benefit from our expertise in establishing legally compliant and effective trusts.
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 trust registration.
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.
Therefore, the relationship between the parties involved is essential in defining trust. 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
The trust registration process involves the following parties:
The trustor is the person who establishes the trust. They are typically the owner of the assets or property being placed in the trust.
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.
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. Here are the different types of trusts:
Private Limited Trusts
Private Limited Trusts are established to carry out activities for specific individuals, families, or close associates. These trusts can have beneficiaries closely related to the trust’strust’s founders. Private limited trusts are governed by The Trusts Act of 1882.
Public Limited Trusts
Public limited trusts are typically created to benefit the general public. They are often established for charitable, educational, and religious purposes and are governed by specific statutes such as the Religious Endowments Act of 1863, the Charitable and Religious Trust Act of 1920, or the Bombay Public Trust Act of 1950. Charitable and religious trusts are the most common types of public trusts in India.
Public Cum-Private Trust
This type of trust serves both public and private purposes. It can utilize its income for the benefit of the public and specific individuals or families. The beneficiaries of a public cum-private trust can be a combination of public and private individuals.
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.
In the case of public trusts, no singular governing act applies uniformly. Public trusts in India must be registered with the relevant state authority as required by the applicable state act.
Several laws play a significant role in the regulation of trusts in India. These include:
Reasons for Trust Registration
Trust registration is necessary for the following reasons:
By registering, trusts fulfill their objectives, gain legal recognition, and access government benefits and opportunities.
Benefits of Trust Registration
Trust registration offers several advantages to individuals and organizations. Here are the key benefits:
By registering a trust, individuals can enjoy these benefits, including financial advantages, legal protection, and asset management flexibility.
Requirements for Trust Registration
To be eligible for trust registration, the following criteria must be met:
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:
The trust deed serves as a legally binding document that governs the operations and functioning of the trust, providing clarity and guidance to all parties involved.
Documents required for Trust Registration:
Process / Procedure for Applying for Trust Registration
The procedure for applying for Trust Registration is explained in detail below:
Name of the Trust
The parties forming the trust must choose an appropriate name that complies with the provisions of relevant acts such as Trademarks, Copyrights Act, Intellectual Property Rights Act, and Emblems and Names Act, 1950.
Settlers of the Trust
Determine the individuals who will act as settlers of the trust. While there is no restriction on the number of trustees, a minimum of two trustees is required. The author of the trust cannot be a trustee, and all trustees must be residents of India.
Prepare a Memorandum of Association for the Trust
Prepare a Memorandum of Association (MOA) that outlines the objectives and purpose for which the trust is being formed. Ensure that the goals stated in the MOA are legally permissible.
Draft the Trust Deed
Create a trust deed, which is a legally binding document that establishes the trust. The trust deed must be presented to the registrar when registering the trust. It should contain all the terms and conditions agreed upon by the author, trustees, and beneficiaries.
Submit the Deed to the Registrar
Once the trust deed is drafted, submit it to the registrar and other required documents. The author, trustees, and beneficiaries will be involved in this process.
Obtain Certificate of Trust Registration
After reviewing the submitted documents, the trust will be registered if the registrar is satisfied with their validity and compliance. The registrar will issue a trust registration certificate, which the trustees and the trustor should keep. Once the trust is registered, a bank account can be opened in the trust’s name.
Winding up a trust
Winding up a trust occurs when all the trust’ properties/assets are distributed lawfully to the beneficiaries or a similar entity, directly or through resettlement. During the winding-up process, the parties involved must address any tax obligations resulting from the asset transfer. It is essential to comply with the approval of the charity commissioner, court, or other applicable laws to minimize the risk of legal disputes.
How can Financial Tree Company help in securing Trust Registration?
At Financial Tree Company, our team of experts is committed to providing you with the necessary support for Trust Registration and ensuring compliance. Trust registration in India involves intricate legal implications that require careful attention. Our professionals ensure that you gain a deeper understanding of the governing provisions of Trust in India, enabling you to undertake Trust-related activities with minimal legal hassles.