Trusts

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TRUSTS

VALLI.A



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

INTRODUCTION

• A Trust is a relationship whereby Property (real or personal, tangible or intangible) is held by one party for the benefit of another.

• It arises when property is transferred by one party to be held by another party for the benefit of a third party.

• It is also possible for a legal owner to create a trust of property without transferring it to anyone else, simply by declaring that the property will henceforth be held for the benefit of the beneficiary

• A trust in simple terms an agreement whereby a person or company agrees to hold an asset for the benefit of the others.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

PERSONS INVOLVED IN TRUST

• Settlor - Who transfers his property to the trust

• Trustee - who receives the property by the settler, and who controls the asset is known as the ‘trustee’ he has legal title to the trust property The trustee owes a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property.

• Beneficiary - who is receiving benefit out of the trust. Beneficiaries have equitable title to the trust property



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

www.altacit.com

Cntd..

Contribution of Consent require

Assets for some action

Distribution

TRUST(THE

TRUSTEE)

SETTLOR PROTECTOR

BENEFICIARIES



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Creation of trust - Indian Trust Act 1882

• According to sec 3 of Indian Trust Act 1882, a trust is an obligation annexed to the ownership of the 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 another and owner.

• Different states in India have different Trusts Acts in force, which govern the trusts in the state; in the absence of a Trusts Act in any particular state or territory the general principles of the Indian Trusts Act 1882 are applied.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Cntd..

• The person who reposes or declares the confidence is called the author of the trust

• The person who accepts the confidence is called a trustee

• The person for whose benefit the confidence is accepted is called a beneficiary. According to sec 4 of Indian Trust Act a trust may be created for any lawful purposes

• Trustees : A trust needs a minimum of two trustees; there is no upper limit to the number of trustees. The Board of Management comprises the trustees



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Main Instrument

• The main instrument of any public charitable trust is the trust deed, wherein the aims and objects and mode of management should be enshrined.

• In every trust deed, the minimum and maximum number of trustees has to be specified.

• The trust deed should clearly spell out the aims and objects of the trust

• It should be clearly specified about how the trust should be managed, how other trustees may be appointed or removed.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Types of Trusts

• Two types of trusts can be created and Registered as per Indian Trust Act 1882

• a. Trust of immoveable property• b. Trust of moveable property

The Three most common types of trusts are:

• Discretionary Family Trusts• Unit trusts• Hybrid Trusts



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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TRUST OF MOVEABLE & IMMOVEABLE PROPERTY

• A trust of immoveable & moveable property may be created upon satisfying following conditions:

• Declared by a non-testamentary instrument in writing signed by the author of the trust

• Indicating with reasonable certainty to create a trust

• Purpose of the trust• The beneficiary and the trust property and

transfers the trust-property to the trustee • The instrument should also signed by the

trustee, and registered.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Difference in creation of trust of Immoveable and moveable.

• The important difference in creation of trust of immoveable property and trust of moveable property is that the former requires the instrument to be registered unless it is created by the will of the author and in the later there is no condition to be registered and however proper proof for transferring the ownership of the property to the trustee is required.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Discretionary Family Trusts

• A family trust is the most common trust used by small to medium size business owners, investors and medical professionals. They are generally set up to hold a family’s assets and/or business for the benefit of providing asset protection and tax planning for family members.

• From a tax perspective the main advantage is that any income generated by the trust from business activities and investments, including capital gains can be distributed to beneficiaries in low tax brackets to significantly reduce taxes.

• Assets held in a family trust cannot be attacked by creditors or lawsuits.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Unit Trust

• A unit trust is like a company where the trusts property are divided into a number of shares called units. The number of units you hold will determine your entitlement to your share of income, capital gains and voting power. Units in a unit trust can also be categorised. For example you can have income units and capital units. Also unit holders can be individuals, companies or discretionary trusts.

• The taxation benefits are generally not as flexible as a discretionary trust in that any income distributions must be distributed to unit holders as per their share of units.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Hybrid trusts

• A hybrid trust takes the best features of a discretionary trust and the best features of a unit trust and puts them into one. This means that the trustee has the discretion to distribute benefits to the beneficiaries of the trust – to beneficiaries who are on low tax rates, as well as have unit holders who are absolutely entitles to a portion of the

benefits.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Formalities

• Intention. There must be a clear intention to create a trust

• Subject Matter. The property subject to the trust must be clearly identified

• Objects. The beneficiaries of the trust must be clearly identified, or at least be ascertainable. In the case of discretionary trusts, where the trustees have power to decide who the beneficiaries will be, the settlor must have described a clear class of beneficiaries



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Purposes

• Privacy. Trusts may be created purely for privacy• Spendthrift Protection. Trusts may be used to

protect beneficiaries (for example, one's children) against their own inability to handle money.

• Wills and Estate Planning. Trusts frequently appear in wills

• Charities. In some common law jurisdictions all charities must take the form of trusts

• Unit Trusts. The trust has proved to be such a flexible concept that it has proved capable of working as an investment vehicle

• Pension Plans. These are typically set up as a trust, with the employer as settlor, and the employees and their dependents as beneficiaries



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Cntd.

• Remuneration Trusts. Trusts for the benefit of directors and employees or companies or their families or dependents.

• Corporate Structures. Complex business arrangements, most often in the finance and insurance sectors, sometimes use trusts among various other entities in their structure.

• Asset Protection.• Tax Planning. The tax consequences of

doing anything using a trust are usually different from the tax consequences of achieving the same effect by another route.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

THANK YOU

Documents

Trusts