Trust: Charitable Trust Registration Process, Trust Type, Documents etc.

There are several questions in our mind about Trust. If anybody desires to start a Trust, then what they do, how to start, so here is the solution we share regarding Trust. Basically, a trust is a legal relationship in which the legal title to property is committed to a person or legal entity with a fiduciary duty to hold and use it for another’s advantage. Throughout this article, we provide complete information about the “Trust registration process” and you get the information about the Trust and Public Charitable Trusts, What is Trust, how they work, the Trust registration process etc.

Application Form

If you are interested to list your NGO in our portal, then fill the form to further process. Our team will coordinate with you. (This form is only an application). 

[TABLE OF CONTENT]
What is Trust?
Charitable Purpose
Types of Trust
Role of Trustee
Trust Registration Process (Flow Chart)
Trust Registration Process
What are the Benefits of Trust Registration?

What is Trust?

According to Section 3 of the Indian Trust Act, 1882, Trust means that when an obligation is attached to / owned by the property, a person (the settlor) puts the Trust in the hands of another person (Trustee) ( Third-party beneficiary). In other words, a trust is a legal vehicle that allows a third party, a trustee, to operate and manage assets in a trust fund on behalf of a beneficiary. A trust dramatically increases your choices about controlling your assets, whether you’re trying to shield your wealth from taxes or pass it on to your kids.

Charitable Purpose

In the amendment, the expression “Charitable Purpose” Act under section 2 (15) is included in:

  • Relief of the poor,
  • Education,
  • Medical Relief
  • Advancement of any other object of general public utility.

Types of Trust

Trusts are classified into two categories:

Public Trust

Public Trust is the one whose beneficiaries include the general public at large or a sizeable portion. Public Trust is further categorized into:

  • A public Charitable Trust
  • Public Religious Trust

Public Trust is known as a Non-Profit Charitable Organisation or Non-Governmental Organisation (NGO).

However, charitable and religious trusts fall under the rule of “Charitable and Religious Trusts Act, 1920, Religious Endowment Act, 1863, Charitable Endowments Act, 1890, Bombay Public Trusts Act, 1950” as the law of public trusts in India Are listed.

Note: The Central Act does not apply to public trusts. However, various states have passed their terms and their functions for administration.

Reasons for creating Public Trust?

The main reason for building public trust from two types of trust is;

  • Public trusts are relatively popular because they are straightforward to register and manage.
  • A public trust can avail exemption from the government under the Income Tax Act.

In addition, the charitable Trust has three requirements:

  1. Declaration of trust made by Settler which is binding on him,
  2. Separation of certain property by the settler and thereby deprive himself of ownership, and
  3. Description of an item, what will be the property of the beneficiaries.

The property is considered once transferred to a trust.

Further, in case of violation of public trust, either the Advocate General or a suit regarding two or more persons interested in the trust may institute:
1. Removing a Trustee,
2. Appointment of a new trustee,
3. To keep any property in Trustee,
4. Instruct the expelled Trustee to occupy the property of any trust,
5. Directing the audit also.

Private Trust

A private trust is one whose beneficiaries are individuals or families. A private trust is further classified into: –

  • Private Special Trust / Private Discretionary Trust: In this case, both the beneficiary and the share are determined.
  • Where either of the two beneficiaries and their share is uncertain.

However, faith can be a mixture of both. Such trusts are called public-cum-private trusts.

Content of a valid Private Trust

Guidelines for creating a private trust are given below.

  1. The settlor of the property should declare some property set aside for the benefit of the beneficiaries.
  2. According to the trust deed, there should be a trustee to manage the property for the benefit of the beneficiaries. A settler may also be a trustee of the same trust.
  3. There should be a beneficiary or beneficiary who benefits from the property of the colonizer (trust).
  4. Trust properties properly demarcated.
  5. Besides, the objects of the trust must be clearly specified.

Reasons for creating a Private Trust?

The private trust route of succession planning is gaining popularity in India as money asset protection grows rapidly. It helps in securing the property while the heirs can benefit from it. Furthermore, it helps to maintain the next generation of wealth rather than dispose of it shortly. Besides, he can enjoy tax benefits or deductions.

  • Private trusts help in applying the trust’s assets and insolvency protection to retain the trustee’s beneficiary or beneficiary.
  • A private trust declared by will, registration would not be necessary, even if it included an immovable property.

In the case of these trusts, a part of their income is used to promote public welfare, while the other part goes to an individual(s). The part of income going to a person (s) is assessable as private, while the part used to promote public welfare is eligible for tax exemption under section 11. The only condition applicable over here is that the trust must have been created before 1-4-1962, that is, before the commencement of the Income-tax Act, 1961. Public-cum-private trusts created on or after this date are not eligible for this exemption under Section 11.

This article is to guide you in registering a charitable trust. It is an attempt to remove all doubts, questions and confusion related to it. Before getting the registration and going for the trust registration, you should know the basic concept behind thTrTrust and some related terms.

Role of Trustee

Let’s have a look critical role of the Trustee.

Author of Trust

A person who repeats or declares the trust is called the “author of the trust”.

As per the Indian Trust Act, any person or minor permitted by the contract can trust the principal civil court of the original jurisdiction. But in each case, according to the law for the circumstances and the time limit on which the author of the trust can dispose of the trust property.

Trustee

A person who accepts a faith revoked or declared by the author/settler is called a “trustee”.

According to the Indian Trust Act following can be a trustee:

  • A person capable of holding property; But, where the trust involves the exercise of discretion, it cannot proceed until it is competent to contract.
  • The trust is not obliged to accept.
  • A sign of acceptance with reasonable certainty by any words or acts of the trustee.
  • Instead of accepting a trust, the expected trustee can reject it within a reasonable time. Such rejection prevents the trust property from being vested therein.
  • Disclaimer by two or more co-trustees to reject the trust-property in one or the other and form the sole trustee or trustee from the date of creating the trust.
  • A trustee has to fulfil the purpose of the trust while following the Settler’s instructions given at the time of its creation, amended with the consent of all other trustees.
  • A trustee has the right to work, reimbursement expenses, settlement of accounts, decree etc. However, a trustee cannot relinquish after approving, nor can he use the trust property for his own benefit. He cannot delegate or work in private.

Beneficiaries

Those who benefit from the confidence accepted by the author/settler and Trustee are called “beneficiaries”.

According to the Indian Trust Act, any person who is a beneficiary can keep the property. Beneficiaries have the right to rent, benefits and specific execution, seeking copies of the trust’s instruments, forcing them to do any work, etc. A proposed beneficiary may relinquish their interest to the Trustee subject to the Trustee with a claim inconsistent with the disclaimer or notice of the trust.

Trust property

The subject f Trust is called “trust property” or “trust money”—an Instrument of Trust – “Instrument of Trust” The instrument by which trust is declared.

Trust Registration Process (Flow Chart)

Here we are providing the information about Trust Registration Process; follow these easy steps to start a Trust. Let’s see.

Trust Registration Process

1.  Before registering your Trust, you must make the following decisions:

  • Name of the Trust
  • Address of the Trust
  • Objects of the Trust (charitable or Religious Trust)
  • One Settler of the Trust
  • Two Trustees of the Trust
  • Trust property movable or immovable property (To save on stamp duty, a small amount of cash/check is usually given to be the initial property of the trust).

2.  Prepare a trust deed on stamp paper of expected value (8% of the value of the trust’s property in Delhi. This rate varies from state to state)

3.  Registration requirement of the trust deed with the local registrar under the Indian Trust Act, 1882:

  • Trust deed on stamp paper of expected value (as stated at point 2 above)
  • A passport size photograph and a copy of the settler’s identity
  • One passport size photograph and a copy of proof of identity of each of the two trustees.
  • A passport size photograph and a copy of the proof of identity of each of the two witnesses.
  • Signature of settler on all pages of a Trust Deed.
  • Witness by two persons on the trust deed.

4. Go to the local registrar and submit a trust deed along with a photocopy for registration. The photocopy of the deed must also contain the signature of the settler on all pages. At the time of registration, the Settler and two witnesses must be present in person and their identity proof in the original.

5. The Registrar retains the photocopy and returns the original Registered copy of the Trust Deed.

It is an essential instrument of Trust. It contains a declaration of the aims, objectives and modes of management (of the trust). Trust deed proves the legal status and is mandatory if a property is involved, especially land and building, to provide “A Prima Facie” evidence.

The appointment and removal procedures are outlined in the trust deed to eliminate any opportunity for the future discrepancy. In the case of a change of trustees or their number or registered address for the trustor aims and objectives, a new trust deed should be prepared after this one must be registered at the Registrar’s Office. Without a well-crafted fiduciary trust, there is a greater likelihood of confusion, issues and disputes in the future. YouTrTrust will face many problems in purchasing projects or raising funds. If not prepared properly, the trust deed becomes useless and is akin to working without registration.

Some people mistake mimicking trusts of existing trusts which is again a big mess because every trust is different and the memorandum should be prepared explicitly targeting their particular needs. Thus, it is advisable to hire a consultant, as they are experienced in formulating trusts that meet specific needs. Their main function is to prepare a trust deed.

Document Required

  • Charitable Trusts are registered under Public Trusts under the public trust Act, 1882.
  • Needs a minimum of 2 persons above 18 years old just in case} of female and 19 years old in case of males with a sound mind and with any or no educational qualifications.
  • Government, Semi-Government employees too are eligible to be Trustees of trust with a condition that they create no profit, salary or personal interest for themselves through the public trust and offer selfless social services to the Trust.
  • Aadhar, PAN Card (Original and their Self Attested Copies) are required together with Water/ Electricity bills within their name or in the owner’s name of the property together with the Permission/Consent letter of the owner to open Registered Office of Trust(NGO).
  • Rent Agreement too required if the property is on rent, 2 witnesses one amongst which to be Registered Advocate together with 2 passport-sized photos.
  • Trust Deed to be signed and submitted in Sub-Registrar office under Revenue Department of the concerned District Court of the respective area/district.

NOTE: Legal document done by an experienced or knowledgeable Advocate to avoid future conflicts.

What are the Benefits of Trust Registration?

Here in this section, we provide information about critical topics like the Benefits of Trust Registration?. Let’s have a look one by one.

  • To Include in Charitable Activities
  • Registered Trust Avails Tax Exemptions
  • Gives Benefits To Poor People
  • Compliance With Law
  • Preservation Of Family Wealth
  • Avoid Probate Court
  • Immigration Of Family
  • Forced Heirship
  • Tax Mitigation & Managing Assets

Frequently Asked Questions

What are the Documents Required During the Trust Registration process?

> Charitable Trusts are registered under Public Trusts under the public trust Act, 1882.
Needs a minimum of 2 persons above 18 years old just in case} of female and 19 years old in case of males with a sound mind and with any or no educational qualifications.
> Government, Semi-Government employees too are eligible to be Trustees of trust with the condition that they create no profit, salary or personal interest for themselves through the public trust and offer selfless social services to the Trust.
> Aadhar, PAN Card (Original and their Self Attested Copies) are required together with Water/ Electricity bills within their name or in the owner’s name of the property together with the Permission/Consent letter of the owner to open Registered Office of Trust(NGO).
To know more information about documents required during the trust registration process, read the above article.

What are the different types of Trust?

There are two types of Trust
1- Private Trust
2- Public Trust

What is the Difference between Trustee and Trustor?

Trustor is the person who creates the trust, whereas the person responsible for accomplishing the trust for the beneficiary is known as a Trustee.

How to start Trust?

Before registering your trust, you must make the following decisions:
> Name of the Trust
> Address of the Trust
> Objects of the Trust (charitable or Religious Trust)
> One Settler of the Trust
> Two Trustees of the Trust
> Trust property movable or immovable property (To save on stamp duty, a small amount of cash/check is usually given to be the initial property of the trust).
To check the complete process of starting trust or filling the trust registration form, read the above article carefully.

Does a charitable trust need to be registered?

All Charitable Incorporated Organisations (CIOs) must register with the Charity Commission, regardless of their annual income. CIOs do not formally exist as charities until they are registered for the charitable trust registration.

What is the difference between trust and charitable trust?

Charitable Purpose a charitable purpose improves, benefits or uplifts humankind mentally, morally, or physically. The requirements of intention, trustee, and res in a charitable trust are the same as those in a private trust. As a general rule, a charitable trust may last forever, unlike a private trust.

For other registration-related questions, you can comment on the box below. Our Experts Team will provide you with the best possible solution.

Best of Luck!!!

18 thoughts on “Trust: Charitable Trust Registration Process, Trust Type, Documents etc.”

  1. Can a settler be one of those trustees in the trust?? Is it mandatory of having atleast 2 trustees??? I want to run the trust only with a settler and a chairperson…. Is it possible sir/mam?? Awaiting your reply….

    Reply
    • Yes. The Settlor or Author is usually a Trustee too. In rare scenarios when the actual Settlor is not able to be physically present in the court then anyone on his behalf can be a settlor only in case of (attaching movable property to the trust). That person will only be settlor and not Trustee & later can resign as Trustee as per mutual arrangements. In General, if there is mutual agreement between other Trustee(s), the Settlor/Author is Trustee too.

      Reply
  2. I am disable in ortho. I registered trust for intellectual challenged. I am in vellore district. To whom i want to inform and start the same. Please help to us. Thanks.

    Reply
    • Charitable Trusts are registered under Public Trusts under Charitable Trust Act, 1882. You need atleast 2 persons above 18 years of age in case of female and 19 years of age in case of males with sound mind and with any or no educational qualifications. Government, Semi Government employees too are eligible to be Trustee of a Charitable Trust with a condition that they make no profit, salary or personal interest for themselves through the Charitable Trust and offer selfless social services to the Trust. Aadhar, PAN Card (Original and their Self Attested Copies) are required along with Water/ Electricity bill in their name or in owner’s name of the property along with Permission/Consent letter of owner to open Registered Office of Trust(NGO). Rent Agreement too required if property is on rent. 2 witnesses one of which to be Registered Advocate alongwith 2 passport sized photos. Trust Deed to be signed and submitted in Sub-Registrar office under Revenue Department of the concerned District Court of the respective area/district. It’s advisable that you get your Trust Deed done by an experienced or knowledgeable Advocate to avoid future conflicts.

      Reply
    • Yes the trust deed is enough because the most important document required for Trust registration is ‘Trust Deed.

      Reply
    • Hello Naveen,
      If you want to start a trust then there are just six steps to setting up a trust:
      Decide how you want to set up the trust.
      Create a trust document.
      Sign and notarize the agreement.
      Set up a trust bank account.
      Transfer assets into the trust.
      For other assets, designate the trust as a beneficiary.

      Reply

Leave a comment