A “Trust” is an obligation annexed to the ownership of the 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 owner. (Sec 3 of Indian Trust Act, 1882)
The person who reposes and declares the confidence is called the ‘author of the trust’; the person who accepts the belief is called the ‘trustee’; the person for whose benefit the confidence is accepted is called ‘beneficiary’; the subject matter of trust is called ‘trust property,’ and the instrument by which the trust is declared is called the ‘the instrument of trust or trust deed.’
In simple words, a “trust” is a relationship where the property is held by one party for the benefit of another party.
A Family or Private Trust can be created for any lawful purpose where the beneficiaries are family members of the Author of the trust. The purpose of creating a family trust is to protect and manage family assets for current and future generations.
Trust is one of the options to be considered in Succession Planning. A Family Trust can be created for the benefit of a Spouse, Minor Children, Dependent Parents, Disabled Dependents, or other relatives.
Trust can be created with whatever resources one has. There is no minimum requirement for the corpus. The trust’s corpus can be augmented with further contributions and with returns earned on the assets held by the trust. A trust also can receive gifts from well-wishers and others.
A well-thought-out Succession Plan can help minimize the conflicts and holistic distribution of assets among the family members. The private family trust would fit the needs with few administrative hassles and be tax efficient in having an effective Succession Plan.