Trust, one of the key non government organizations of India is formed with at least three members. The members of the such institution are known as trustee, beneficiary and the settlor. Many people get confused between society and trust and some think that both are the same, but it’s not like that. Although both are the type of non government organization they are completely different from each other. One is formed for the benefit of the third person and the other is formed for people at large. The motive of formation of both is philanthropy. In the current blog will discuss the trust: definition, advantage, and types. To understand it more closely go through the blog till its last line.
What are the Trust: Definition, Advantage, and Types?
There are three main aspects of the trust registration which are trust: definition, advantage, and types. Let’s discuss about the trust: definition, advantage, and types one by one for the better understanding of these concepts:
What is a Trust?
Among the trust: definition, advantage, and types, we will discuss the definition first. A definition of trust is provided in Section 3 of the India Trusts Act of 1882. This section defines trust as a responsibility associated with the ownership of either moveable or immovable property. The foundation of trust is a confidence that the property owner has declared and accepted for the benefit of another party, referred to as the beneficiary. Three parties are involved in a trust: the beneficiary, the trustee, and the trust’s author. The individual who announces or reposes the confidence is the author of the trust. The “trustee” of the trust, on the other hand, is the individual who accepts the confidence. The term “beneficiary” refers to the person for whose benefit the trustee accepts the confidence.
Advantages of Trust Registration in India
Out of the trust: definition, advantage, and types, some of the key advantages of registration of such institution are discussed below:
- Trust registration provides legal recognition to the organization, establishing it as a legitimate entity.
- Registered trusts are often perceived as more credible and trustworthy, enhancing their reputation.
- Trusts may be eligible for tax exemptions, providing financial benefits to the organization and its contributors.
- Registered trusts can attract donations and funding more easily as donors prefer contributing to recognized and credible entities.
- Trusts, once registered, enjoy perpetual succession, ensuring continuity even if the trustees change.
- Registration allows for proper management of trust assets, ensuring transparency and accountability.
- Trust registration facilitates public recognition, making it easier to collaborate with other organizations and government bodies.
- A registered trust has legal standing in court, allowing it to sue or be sued in legal matters.
- Trusts have flexibility in their operations, allowing them to work towards their objectives without unnecessary constraints.
- Trusts, through their registered status, can more effectively contribute to social causes and community development.
- Registration enables proper succession planning, ensuring a smooth transition of leadership within the trust.
- Trusts gain greater visibility and recognition within the community and among potential beneficiaries.
- Registered trusts may be eligible for government support and grants for specific projects or initiatives.
- Trusts, by being registered, can access various resources and benefits made available by the government and other institutions.
- Registration promotes accountability and transparency in the functioning of the trust, fostering trust among stakeholders.
- While there are certain compliance requirements, registered trusts benefit from a structured framework that guides their operations.
- Collaboration with other NGOs, businesses, or government bodies becomes smoother with trust registration.
- Trusts involved in educational activities can gain recognition, making it easier to collaborate with educational institutions and authorities.
Different Types of Trusts in India
There are three main aspects of trust: definition, advantage, and types. Out of the trust: definition, advantage, and types, here we are talking about the different types of the trusts, which are mentioned below in the table:
| Types of Trusts | Details |
| Public Charitable Trust | Aimed at benefiting the public at large and its main focus is on areas like education, healthcare, and poverty alleviation. |
| Private Trust | Created for the benefit of specific individuals or families and they are often used for succession planning and wealth management. |
| Religious and Charitable Trust | Established for religious or charitable purposes and they support activities aligned with a particular religion or community. |
| Educational Trust | Dedicated to promoting education and knowledge |
| Specific Object Trust | Formed for a specific purpose or goal |
| Wakf Trust | Primarily in the context of Muslim law and it involves dedicating property for religious or charitable purposes |
| Revocable Trust | Allows the settlor to alter or terminate the trust and they offers flexibility and control over trust assets |
| Irrevocable Trust | Cannot be altered or revoked by the settlor and they provides greater security but with less flexibility |
| Implied Trust | Arises based on the conduct or circumstances, not explicitly stated and in such trusts decisions are made based on the implied intentions of the parties involved |
| Constructive Trust | Imposed by a court of law in order to prevent unjust enrichment and they are like a legal remedy to address breaches of trust |
| Testamentary Trust | Created through a will and comes into effect after the settlor’s death and they are often used for the inheritance of assets |
| Express Trust | Clearly stated and documented trust with specific terms and conditions and terms are explicitly expressed by the settlor |
| Discretionary Trust | Provides trustees with discretion in distributing benefits. Here the beneficiaries do not have a guaranteed right to receive income |
| Fixed Trust | Specifies how trust income is distributed among beneficiaries and offers a structured and predetermined distribution pattern |
| Blind Trust | Settlor relinquishes control over trust management. Such kind of NGOs are used to avoid conflicts of interest, especially in political contexts |
| Charitable Trust for Animals | Their main focus is on the welfare and protection of animals. They supports animal shelters, conservation, and related causes |
| Real Estate Investment Trust (REIT) | Specialized trust for real estate investments and they allows investors to pool funds for real estate projects |
| Mutual Fund Trust | Operates as a mutual fund, pooling funds from multiple investors. In such NGOs investments made in accordance with the fund’s objectives |
| Start-up Trust | Supports the development and growth of start-up businesses. They provides funding, mentorship, or resources to new enterprises |
| Family Discretionary Trust | Offers flexibility in distributing benefits among family members and they allows trustees to make decisions based on family needs |
Conclusion
The most important things regarding trust: definition, advantage, and types are discussed in the present blog. A trust, a crucial form of non-governmental organization in India, involves three key members: the trustee, beneficiary, and author. Distinct from a society, it serves philanthropic purposes, aiming to benefit specific individuals or the public at large. The advantages of trust registration include legal recognition, enhanced credibility, tax exemptions, and the potential for attracting funding. There are various types of trusts in India, such as public charitable trusts, private trusts, and educational trusts, each serving unique purposes ranging from social welfare to religious or family-oriented objectives. Trust registration not only provides a structured framework for transparent operations but also opens avenues for collaboration, funding, and government support, contributing significantly to social development and community welfare.
