Family trusts and trust funds are rarity in India, but the fact is that they are a very novel method of planning ahead for the educational and marriage expenses of children as well as for tax planning. The abolition of the Gift Tax Act has freed up family trusts to be used as a tax planning tool. However, most people do not understand the value of family trusts or trust funds and do not bother to find out the process to setup family trust and trust funds. If you are new to the concept of family trust funds, then read on to learn more about it and how you can set it up.
Overview of Family Trust Funds
A family trust India is basically an instrument for holding property for the dependants and other family members who are termed as beneficiaries. The rules and regulations that govern such trusts and trust funds are stated in the Indian Trust Act, 1882.
Trust funds India allow you to plan for your estate and family. Other legal instruments that can help you do this include Power of Attorney, Gift, Insurance, Wills, Partition and Transfer of property. You can setup family trust in your lifetime, which would be called a revocable trust by Indian law.
The most common example of family trusts is the children specific trust. In this kind of trust, the property and assets are handed over the children once they reach a specific age or when they meet other conditions. For example, the ownership may be transferred only upon marriage. Another good example of a specific family trust India is popular for is the retirement trust. There are set up by employers for providing retirement benefits in the future. Such trust funds are commonly known in India as PF trust funds.
Definition and Procedure to Setup Family Trust
• A trust can be formed by anyone, so long as they are competent to form a contract. The competency of a person is based on the following characteristics
• The person is older than 18 years
• The person is of sound mind
• The person is not specifically disqualified by Indian law from entering into contract
• The person is acting on behalf of a minor with the proper permission of civil court
There are certain requirements for a family trust India laws have set. Given below are these requisites:
• The settler or author of the family trust, at whose instance the trust shall become existent
• A set purpose for forming the trust- for divesting ownership of the author in favour of the trustee or beneficiary
• A trustee who is capable of managing the property and trust funds
• A beneficiary for whom the trust is intended for
• The subject of the family trust, which could be any asset whose ownership is capable of being transferred
If you would like to know the process to setup family trust and trust funds India, then the first step is to form the family trust deed. This dead would include the name and details of the author, beneficiaries, trustees, purpose and administration of the trust, and other specific clauses. Once you have made a family trust deed, you can prepare a registered, written document that sets up the trust. If the trust has an immovable property involved (like an ancestral home), then you need to form a trust deed that states this on an adequate stamp paper and registered with the Registrar of Assurances. The document must contain a detailed description of the property so it can be clearly identified, as well as the title of the property.
If you are transferring a movable property to the trust, then there is no need for any written documentation or registration to do so. The property can be added to the trust funds by simply changing the ownership, or physical handover of the possession to the trustee along with a direction that the property is being held by the family trust India for the beneficiary’s benefit.
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