Trust Registration
Trusts are primarily referred to as a legal arrangement for serving different philanthropic goals, including the development of literature, backing financially aggrieved with amenities, offering medical aid, etc. Besides, a trust can help with asset or property allocation within a closed group through a fiduciary arrangement, spanning trustor (property’s owner) trustee (trust manager), and beneficiaries.
Trust plays an instrumental role in advocating a sense of cooperation and support among society. The Trusts Act of 1882 governs law-abiding trusts in India, regulating their operation and formation. Although a trust can be established voluntarily without legal status, doing so can trigger disputes among trustees and interested parties, wreaking havoc on the entire arrangement. Therefore registering a trust is paramount as it imparts legal stability, leading to harmonized operation.
What Do You Mean By A Trust & Trust Registration?
Trust is a legal arrangement formed by a trustor willing to provide beneficiaries with a portion of their assets or property. The trust deed is formed to give trust a legal effect, spanning the subject matter (which is the property in most cases) and the parties involved.
A trust can ensure a seamless asset transfer while eliminating any risk of ambiguity, keeping the concerned parties’ interest intact. Typically, whenever a trust is formed, three parties come into play: A trustor (an owner seeking property transfer), the trustee (who manages the trust), and a beneficiary (who will get the asset).
So, the trustee primarily acts as a bridge between a trustor and beneficiaries, serving various duties within the purview of the Indian Trusts Act of 1882. Securing trust registration is an act of registering this fiduciary arrangement under the Indian Trusts Act of 1882.
Types of Trusts You Must Know
Trusts in India have been classified trust into three major heads. These include:
Private Limited Trusts
These trusts are majorly formed to serve purposes limited to individual or family level such as asset allocation to beneficiaries, disbursing funds among members, etc. These trusts fall under the scope of the Trusts Act of 1882.
Public Limited Trusts
Public limited trusts, as the name suggests, are formed for the general public, majorly serving charitable objectives. Unlike private trusts, these trusts fall under different legislations viz. Religious Trust Act of 1920, the Religious Endowments Act of 1863, or the Bombay Public Trust Act of 1950. Common examples of such trusts include charitable trusts and religious trusts.
Public Cum-Private Trust
This type of trust can serve dual purposes i.e. they can act as public as well as private trust with common beneficiaries including public and private individuals.
Benefits of Trust Registration
Registering a trust comes with several tangible benefits contributing to a hassle-free arrangement and growth. Some frontline benefits of trust registration include the following:
Overcome necessary claims
Instances of dispute over properties among family members are common and often lead to chaotic situations. The trustor or the property owner can form a private trust to overcome such a mishap, ensuring seamless and unprejudiced asset allocation.
Tax Exemption
Charitable trusts experienced several tax benefits in terms of exemption under the sections 12A and 80G. This encourages them to source more funds via donations to fuel their objective.
Asset Protection
A private trust often spans valuable assets such as land, bonds, etc. It ensures all-encompassing legal protection for such assets from illicit claims, ensuring peace of mind for a trustor.
Legal recognition
A trust with a legal status has more gravity from a stability and recognition standpoint. Legal protection triggers a sense of assurance among parties involved, providing for a hassle-free fiducial arrangement.
Lawful Approach
A private or charitable trust attracts various legal implications, making it legally robust and viable. None of the parties in a trust can plunge into voluntary acitvities hampering the interest of others. Involved parties are entitled to act in a way as recommended by legislation. For example, the trustor, once provided with a trust responsibility, cannot sell the property or charge for services.
Documents Consideration for Trust Registration
- Trust Deed with the corresponding stamp value.
- Photographs of the individuals involved in the trust (two per person).
- PAN cards of all individuals associated with the trust.
- Identity proof for the individuals.
- Address proof for the individuals.
- No Objection Certificate for the premises being used (if required).
- Address proof of the trust’s registered office.
- Any utility bill serving as proof of address.
- Authentication from the partners, if applicable.
- 12A Registration and 80G Certificates from the income tax authorities, if deductions are being claimed.
Step-by-Step Guide to Secure the Trust Registration
The trust registration process includes undergoing various key steps as cited below:
Step 1: Select a legally viable name
The trust registration begins with the name selection. The proposed name should be unique and legal. It must align with the provisions of the prevailing Trademark Act and Emblems and Names Act, of 1950.
Step 2: Settlers of the Trust
Select who will serve the role of a settler for the proposed trust. While a trust can accommodate any number of trustees, there should be at least two trustees. The trust’s author cannot serve the role of a trustee as per the law. All trustees must be an Indian resident.
Step 3: Prepare a Memorandum of Association for the Trust
Prepare the charter document viz. Memorandum of Association (MOA) spanning the trust’s objective and purpose. Avoid adding any illicit or misleading element to MoA or else the application shall be rejected.
Step 4: Draft the Trust Deed
Create a trust deed, a legal document reinforcing the legal gravity of a trust. A deed seeks the registrar’s approval while registration. Trust must enclose terms agreed upon by the parties involved.
Step 5: Submit the Deed to the Registrar
After the successful drafting of a trust deed, visit the registrar for draft registration. The presence of the author, trustees, and beneficiaries is paramount for the completion of this step.
Step 6: Obtain a Trust Registration Certificate
Lastly, the document and deed shall undergo inspection for accuracy. If the registrar finds zero loopholes in the paperwork, a trust registration certificate shall be granted to the applicant. The trustor and trustees must have a copy of the same.
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Connecting with Adviso not only ensures professional leverage but also elevates your command over required norms so that you can oversee compliance like never before. Team up with Adviso today to begin a journey of hassle-free compliance.
FAQs: Trust Registration
Q1: Which legislation governs the operational and registration aspects of trusts in India?
A: The Indian Trusts Act of 1882.
Q2: What should I do to set up a private trust for property allocation?
A: Serving such a goal requires adhering to steps such as selecting a trust’s name, selecting a trustee, drafting a deed, and getting it sanctioned via a registrar.
Q3: What benefits are available with Trust registration?
A: Securing a trust registration can lead to many benefits such as tax exemption, legal stability, zero dispute, enhanced transparency, etc.
Q4: What is the process of the trust’s winding up?
A: The winding up of a trust can be performed within in purview of the Indian Trusts Act of 1882. Some key steps involved include filling application, obtaining the consent of the parties involved, and securing the registrar’s approval.
Q5: What is the timeline for securing a trust registration in India?
A: It can range from a few days to weeks depending on the subject-matter of the trust and complication tied to that.
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