Trust Formation

A Trust is defined as an obligation annexed to the ownership of property arising out of the confidence declared and accepted by the owner for the benefit of another, or of another and the owner. A public charitable Trust is usually floated when there is property involved in m terms of land and building.

A trust of immoveable property can be created by two ways, one by a non-testamentary document and another by a testamentary document such as a will. In other words, a trust regarding a immoveable property cannot be created orally but it must be by a document duly registered. A trust of a moveable property can be created either by a document or delivering the property to the trustee with necessary oral directions. If the directions are given in writing it would amount to a trust by a non-testamentary document which may or may not be registered.

A Trust can be created by any person competent to contract or even by a manner with the authority of a competent court and respect of any property which is transferable and over which the author of the trust has dispossessing power.

A Trust may be private and public. When the purpose of the trust is to benefit an individual or a group of individuals or his or their descendants for any legal person and who is capable of holding property, it is a private trust. When the purpose of the trust is to the benefit the public or any section of the public, it is public trust.

A trustee can be any person that is, an individual or a corporate body or a corporate sole, capable of holding property and competent to contract and he must accept the trust.

The Income Tax Act applicable in India defines ‘Charitable Purpose’ to relief of the poor; education, medical relief etc are general public utility. A purpose related to worship or religious teachings is not as charitable purpose. A public charitable purpose has to benefit a large section of public as distinguished from specified individuals.

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