A Trust is a legal arrangement where a person (called the Settlor or Author) transfers property or money to another person or group of people (called Trustees) to manage and use it for the benefit of others (called Beneficiaries). Trusts are usually created for charitable, religious, or social purposes, but they can also be formed for private reasons like managing family assets.
In India, trusts are governed by the Indian Trusts Act, 1882 for private trusts, and public charitable or religious trusts are regulated by state-specific laws.
There are two main types of trusts:
- Private Trust - Formed for the benefit of specific individuals or families.
- Public Trust - Formed for the benefit of the general public, often for charitable, religious, or educational purposes.
To create a trust, a document called a Trust Deed is prepared. It includes details such as the trust's purpose, the name of the trustees, the beneficiaries, and how the trust will be managed.
Key benefits of forming a trust include:
- Legal recognition and protection of assets
- Ability to receive donations and grants
- Eligibility for tax exemptions (if registered under Section 12A and 80G of the Income Tax Act)
A trust is ideal for people or organizations that want to contribute to society in a structured and legally compliant way.