Succession Planning Through Trusts | Truelegacy

Use trusts for better succession planning. We explain what a trust is and how it helps you pass on wealth. Get the facts and secure your family's future now.

Writing a Will and creating a Trust not only protects your assets but also ensures a smooth and structured distribution to your chosen beneficiaries.

Succession planning through a Trust is an effective way to build a strong estate plan.

However, many individuals limit their planning to drafting a Will and overlook the advantages of establishing a Trust.

In this article, we explore what a Trust is and how it can strengthen your overall succession strategy.

What is a Trust?.

A trust is a legal instrument created by the owner of the assets, generally known as the settlor/author of the trust, gives or entrusts another party, known as the trustees, the right to hold title to the property or assets for the benefit of a third party, known as the beneficiary.

These arrangements are used for various purposes to achieve specific goals and are one of the most efficient tools of succession planning in India.

This instrument is used for numerous purposes to achieve specific goals and is one of the most popular ways considered to transfer the assets of a person to an underage beneficiary and by those in family run businesses to ensure that legacies remain alive and keep up with challenging times with minimum conflict or impact on business.

What is the law of Private Trust?.

The law relating to private trusts was codified in 1882 as the Indian Trust Act, 1882.

The Act is applicable to the whole of India, except under the state of Jammu and Kashmir and the Andaman and Nicobar Islands.

It is also essential to note while creating a Trust to not affect with the rules of Mohammedan law or with the mutual relations of the members of an undivided family as determined by any customary or personal law.

The provisions of the Trust are not applicable to public or private religious or charitable donations.

How can a trust be beneficial?.

A Trust is an effective way of succession planning as the owner of the assets can see its implementation during his lifetime, whereas succession planning through a testamentary Will takes place only after the demise of the owner of the assets.

A Trust henceforth helps the settlor or the owner to correct mistakes if any and take proper actions in timely manner.

Another advantage of Trust is that it provides united control and effective participation of all members in the decision-making process thereby mitigating disputes and legal battles among the members.

The statutory formalities in relation with the Trust are also minimal thereby making Trust to operate easily with no heavy regulations.

The instrument is governed by a Trust deed and the information on a private Trust is not available to the public, providing privacy and security.

What is a Trust Deed?.

A Trust deed consists of the intention of the author to make the Trust, the purpose for which the Trust has been created.

Any monetary asset of a Trust is assigned for the advantage of the Trustee.

It also gives control or transfer the Trust property to the trustee which incorporates the intention of the author.

A Trust deed can also be drafted in such a way that the Trustee can claim expenses and salary from the proceeds of the Trust for the work he/she has done in the Trust.