What is a Trust?

A trust is a fiduciary arrangement by which one or third party allows to hold asset’s in the name or allows a trustee to hold any asset in the name or behalf of the beneficiaries. Trusts are created by the persons who generally want to transfer some or whole of their assets to the trust. Trust are also generally made to distinguish that how the wealth of the person should be managed or distributed while that person is alive or after his death. Taxes and creation of probate can be eliminated by the creation of Trust. Making of trust and is maintenance is very costly process and its dismantling/striking down is a difficult process.

A trust is also a way to deliver the property to a beneficiary who has not attained the sufficient age or is suffering from any kind of mental illness by which he is not in the condition to manage finances and capable of properly managing his asset’s, after when he gets fully recovered from all those problems he will receive possession of the trust.

Who can create a Trust?

Any person who has attained the majority age of 18 years and is of mentally sound mind can make trust for any purpose. In case if the person has not attained the age of 18 years, as for these type of children’s Court appoints a guardian, or the said property would be managed by the wards of the court. When the child successfully attains the age of 21 years and is mentally fit, he can be given  controls of superintendence to children as now he has the capability to run a trust.

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Other than human beings, a company, firm, society or collection of some peoples can also create a trust.

There are 2 types of trust in India

  1. Private trust

  2. Public trust


  • Revocable Trusts

This trust is created during the lifetime of the maker of trust which can be altered or revoked fully. Revocable trust are generally also called as living trust, in which the trust maker transfers the title deed of property in the name of trust ad start serving as an initial trustee and he solely enjoys the power of removing the property from the trust during his lifetime.

To avoid making of probate this trust is formulated. If the ownership of assets is transferred to a this trust during the lifetime of the trust maker, which means the asset held by the trust at the time of the trust maker’s death, those assets will not considered as a subject to probate.

A revocable trust can’t be use as an asset protection technique as all of the assets which are transferred to the trust during the life time of trust maker’s has will remain available to the trust maker’s creditors. It will only create a difficulty for the creditors to access those assets as the creditor’s has to move a petition before court by which the court order authorizes them to get the control on those assets.

  • Irrevocable Trust

After formation of this trust, it can’t be altered, changed or modified any property transferred to an irrevocable trust can’t be taken out by the trust maker itself. It is possible to purchase any kind of personal insurance, the benefits of which can be held by an irrevocable trust.

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  • Asset Protection Trust

This trust is specifically created for the protection of the assets from any type of claim from future creditors. These trusts are normally structured so that they are irrevocable for a term of years and so that the trust maker is not a current beneficiary. An asset protection trust is normally structured so that the undistributed assets of the trust are returned to the trust maker upon the termination of the trust provided there is no current risk of creditor attack, thus permitting the trust maker to regain complete control over the formerly protected assets.

  • Constructive Trust

This trust is called an implied trust and is formulated by the Hon’ble Court on the basis of its facts and circumstances. It is on the discretion of the court that has never there was idea or any kind of official announcement of a trust and by consideration of the thought of the owner of the property that for about its usage for a particular purpose or after it will move to any specific person.

  • Special Needs Trust

This trust is created for the persons who receives any kind of special benefits from the government and this trust also sates the principals that beneficiary is not allowed to control the amount which are flowing in the trust and don’t owns any kind of power by which he can revoke the trust.  A person in special need trust can get the money for expenses like for medical, education purpose, insurance, electronics item, or other things which are essential for a human person to survive in this world.

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  • Spendthrift Trust

This trust is established by which it creates a bar on the beneficiary of that trust by which he is not able to sell away or pledge any kind of the property owned by the trust or any which is related as the interest of the trust is called spendthrift trust. From the creditors of beneficiaries, this trust protects the assets from them as they can’t get the title of the assets until the property is given to them by the by the beneficiary of the trust.

Author: Pushkar Khanna,
Delhi Metropolitan Education affiliated to GGSIPU/ 2nd Year/ Law Student

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