Many Purposes – One Solution: Private Family Trust (Part Three)
How to Create a Private Family Trust Document
Creating a trust document is a legal process. Once the nature and type of Private Family Trust is decided, consider the following key elements in structuring the trust and creating a Trust Document. It’s preferable that the Trust Deed is in simple language and contains clear instructions:
Intention
The Settlor (Author) of the Trust must make an unequivocal declaration of their intention, manifested through an external expression.
Objective
The Settlor must clearly define and specify the trust’s objectives. Since these objectives have to be accomplished by the Trustees, who may not always be the Settlor, they must be clearly defined so that Trustees can faithfully accomplish them.
Beneficiaries
The Settlor must specify the beneficiaries, transferring legal ownership of the assets to the Trustees and beneficial ownership to the beneficiaries. The Trust Deed should detail the rights, obligations, and disabilities of beneficiaries, as well as the powers and procedures for adding or removing beneficiaries and who can exercise these powers.
Asset
The Settlor must transfer an identifiable asset, divesting themselves of ownership and beneficial enjoyment of the income/benefit from the asset.
Trustee
The Settlor should appoint the Trustees, responsible for managing the trust assets and adhering to the trust’s terms. Trustees have a fiduciary obligation to hold the trust property for the beneficiaries’ benefit and manage the trust’s affairs. The Settlor or one of the beneficiaries may act as a trustee, provided they operate in that capacity. The Trust Deed should define the rights, powers, liabilities, and restrictions of Trustees, as well as the procedures for their appointment, removal, resignation, or replacement, and the minimum/maximum number of Trustees.
Dissolution
The Settlor should specify the conditions under which the Trust can be dissolved and the method of dissolution.
Dispute Resolution
The Supreme Court of India has held that disputes arising from a trust deed and the Trusts Act are not arbitrable. The Trusts Act specifically provides for dispute resolution, conferring jurisdiction on Civil Courts.
Other Considerations
The Trust Deed should include a Name clause, Registered office clause, and other rules and regulations for the management and administration of the trust’s affairs.
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