Trust Fund Definition
Trust Fund Definition The essential distinction between a public and a private endowment (trust) is that the beneficial endowments vest in an uncertain and a fluctuating body of the persons either the public at large or some considerable portion of it answering a particular description. On the other hand, in a private endowment, the beneficiaries are specific individuals.
Trust is defined in section 3 of the Trust Act, 1882 as “an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another or of another and the owner. In simple words, it is a transfer of property by the owner to another for the benefit of a third person along with or without himself or a declaration by the owner, to hold the property not for himself but for another.
In India, the second most popular form of registration is Trust. However, the statutory provisions, procedures and the laws relating to trusts are confusing. Under Indian Laws, various kinds of public and private trusts can be formed. Here, we have dealt with the laws and procedures related to Public Charitable Trusts.
The Indian Trust Act, 1882 is not applicable to Public Charitable Trust. There is no specific act under which a Public Trust is to be registered, except in Gujarat and Maharashtra. Public Trusts are formed under the general law, with guidance drawn from the Indian Trust Act, 1882. The other relevant acts are Religious Endowment Act, 1863, Charitable & Religious Trust Act, 1920 and The Bombay Public Trust Act, 1950.
The following are the basic ingredients of a valid trust:
- There must be an author or settlor of the trust.
The author or the settlor is the person who sets aside certain property for the benefit of the beneficiaries
- There must be a trustee.
The trustee is the person who manages this property for the benefit of the beneficiaries as per the Trust Deed.
- There must be a beneficiary or beneficiaries.
- There must be a clearly delineated trust property.
- The objects of the trust must be specific.
Creation /Formation Of Trust:
- Creation of a private trust: A Private Trust may be created inter visor by will. If a trust is created by will, it shall be subject to the provisions of the Indian Succession Act, 1925.
The following are the requisites for creation of a Trust:
(i) The existence of the author/settlor of the Trust or someone at whose instance the Trust comes into existence is necessary and the settlor to make an unequivocal declaration, which is binding on him.
(ii) There must be a divesting of the ownership by the author of the trust in favour of the trustee for the beneficial enjoyment by the beneficiary.
(iii) A Trust property.
(iv) The objects of the trust must be precise and clearly specified.
(v) The beneficiary who may be a particular person or persons.
Unless all the above requisites are fulfilled, a trust cannot be said to have come into existence. COPYRIGHT
- Creation of a Public Trust:
Like private trusts, public trusts may be created inter vivos or by will. In the case of Hanmantram Ramnath v. Commissioner of income tax, 1946 14 ITR 716, Bombay High Court held that although the Indian Trusts Act does not specifically apply to charitable trusts, there are three certainties required to create a charitable trust. They are:
(i) A declaration of trust, which is binding on the settlor,
(ii) Setting apart definite property and the settlor depriving himself of the ownership thereof, and
(iii) A statement of the objects for which the property is thereafter to be held, i.e. the beneficiaries.
Trust Fund Definition It is essential that the transferor of the property via the settlor or the author of the trust must be competent to contract. Similarly, the trustees should also be persons who are competent to contract. It is also essential that the trustees should signify their assent for acting as trustees to make the trust a valid one. Once a valid trust is created and the property is transferred to the trust, it cannot be revoked. If the trust deed contains any provision for revocation of the trust, provisions of sections 60 to 63 of the Income-tax Act will come into play and the income of the trust will be taxed in the hands of the settlor as his personal income.
To conclude it can be said that the public and private trust differs in the process of their creation. In creating a charitable or religious trust, a formal deed or any other written instruments not necessary, even if it involves immovable property. It may be created by use of words, but it is that there is divestment of property on the part of the author or the settlor of the trust, and it must vest in the trustee, a third person.