Trusts and wills India

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  • Section 5 f Indian Trust Act says As regards Immovable property Trust is not valid unless it is registered. The only
    Exception Is in the case of will where Registeration is not Necessary.
    In Relation to Movable property no trust is valid unless the ownership of property is transferred to Trustee.
  • Specific Trust is one which provides for specific beneficiary whose share is naturally specified in the Trust Deed.
    There can be 2 or more specific beneficiary.The Trustees of Sucha trust do not have any discretion apportioning
    The income of the trust for the benefit of beneficiary.
    A Discretionary trust on the other hand is a trust where beneficiaries are specific and ascertained , do not have
    Specified shares in the income or property of thetrust. The manner of enjoyment of the trust fund is left to the
    Discretion of trustees
  • Public Trust is normally made for Charitable and Religious Purposes
    Private Trust or Family Trust is intended to provide for family, relatives, friends and others
  • Trusts and wills India

    1. 1. Trusts & Wills 1www.fpgindia.org
    2. 2. Definition As per Section 3 of Indian Trust Act,1882: A “Trust” is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owners, or declared and accepted by him, for the benefit of another and the owner. 2www.fpgindia.org
    3. 3. Parties in Trust  Author/Settlor  Trustee  Beneficiary 3www.fpgindia.org
    4. 4. Terms Related to Trust  Trust property/Trust Money  Beneficial Interest  Instrument of Trust 4www.fpgindia.org
    5. 5. Important Aspects:  Mere Transfer of Income alone is not sufficient  Transfer should be irrevocable  For Movable property, Ownership should be transferred  For Immovable property, writing and registeration is mandatory* 5www.fpgindia.org
    6. 6. For Valid Trust  Author must Indicate:  His Intention to Create Trust  The Purpose of Trust  The Beneficiary  The Trust Property  Transfer of property to Trust 6www.fpgindia.org
    7. 7. Types Of Trusts (1)  Specific Trust  Discretionary Trust 7www.fpgindia.org
    8. 8. Types Of Trusts (2)  Public Trust  Private Trust 8www.fpgindia.org
    9. 9. Types Of Trusts (3)  Executed Trust  Constructive Trust  Resulting Trust  Simple Trust  Special Trust 9www.fpgindia.org
    10. 10. Settlor of a Trust:  A person who is competent to contract as per Indian Contract Act,1882 and is the legal owner of the property concerned.  A Limited Company can be a Settlor  A karta can be a Settlor on Behalf of HUF. 10www.fpgindia.org
    11. 11. Trustees:  Anyone can become a Trustee. A Settlor himself can become a sole trustee or one of the Trustee. Note: The Clubbing provision is Governed by the Relationship between the settlor and the Beneficiary and not that between the Trustee and Beneficiary 11www.fpgindia.org
    12. 12. Tax Planning Tips  It is Advantageous to have specific Trust for a Living beneficiary and a Discretionary Trust for Unborn persons  Trust should be in writing and Registered. Income of Oral Trust is subject to Maximum Marginal rate  Spouse should not be Settlor for the benefit of his/her spouse.  Father/Mother/Grand Parents should not Settle any Property for the benefit of minor child/Children/Grand Children  Inturn Maternal GrandParents may open a trust for Minor Grand Childrens  Also Brother in Law may Settle for Sister in Law and Vice Versa 12www.fpgindia.org
    13. 13. Trusts for Relatives  Private Trust for Spouse  Private Trust for Minor Son/Daughter  Private Trust for Major Son  Private Trust for Married Daughter  Private Trust for Daughter-in-law  Private Trust for Parents 13www.fpgindia.org
    14. 14. Private Trust For Spouse  When spouse’s in reciept of Regular Gifts.  Why: 1.) Where Spouse is Illiterate or Less Educated. 2.) Where one doesn’t have faith in Spouse’s Financial management . 14www.fpgindia.org
    15. 15. Private Trust For Spouse  Settler Should not be: 1. Husband 2. Father/Mother –in-Law  No Restriction on Trustees 15www.fpgindia.org
    16. 16. Private Trust For Minor Income of Minor to be clubbed with parent with higher Income Exception: 1. Where earning is from some specialised skill 2. In case of Physically Disabled Child. 16www.fpgindia.org
    17. 17. Private Trust For Minor Tax Planning Tips: 1. Create 100% Specific Beneficiary Trust and make it a Partner in Partnership Firm 2. Create 100% Specific beneficiary trust with the provision of deferment of the benefit during the minority. 17www.fpgindia.org
    18. 18. Private Trust for Major Son  Benefits: To teach Financial Management.  No restriction on Settler  No risk of Clubbing of Income.  Mentioning of share of each son is required in case of joint trust. 18www.fpgindia.org
    19. 19. Private Trust for Married Daughter  Benefits: To avoid the money belonging to daughter, given through gifts to be used by In laws in case of Financial Crisis 19www.fpgindia.org
    20. 20. Private Trust for Daughter-in Law Helps to create separate Income tax file  Before Marriage: Any one can settle the Trust  After Marriage: Spouse and father/mother in law should avoid become settler 20www.fpgindia.org
    21. 21. Private Trust for Aged parents  To Support Old Parents with no sizeable Income.  No Clubbing  No Restriction on Investments. 21www.fpgindia.org
    22. 22. 100% Specific Beneficiary Trust For Senior Citizens 22www.fpgindia.org
    23. 23. Features  Advantageous for Ailing Senior Citizens  S.C can transfer all existing arrangement to this Trust.  Tax Treatment of Gifts will be same as in case of Individual and HUF.  The Trust Deed should thus Specifically mention the method of distribution of assets after demise or it should be mentioned through will. 23www.fpgindia.org
    24. 24. Tax Planning through Discretionary Trust 24www.fpgindia.org
    25. 25. Taxation on Discretionary Trust  Assessable to Income tax at maximum Marginal rate of Income tax  Maximum Marginal rate means the rate of Income Tax applicable in Relation to the highest slab of Income in the case of an Individual. 25www.fpgindia.org
    26. 26. Exceptions  Where Discretionary Trust Created Through Will  Where DT is mainly created for the benefit of relatives in unfortunate circumstances e.g. orphans or Physically or mentally retarded. 26www.fpgindia.org
    27. 27. Discretionary Family Trust  This is created for the Holistic Safety of Family members  It is to provide future Safety and Security for existing and Future family members.  It can be created by a living person and which can become immidiately Operational 27www.fpgindia.org
    28. 28. Taxation Discretionary Family Trust 28www.fpgindia.org
    29. 29. Taxation  In case DFT is created by living person , it will be taxed at Maximum marginal rate.  If Created through Will, then at normal Slab rates of Individuals.  No tax liability on Receiving Gifts more than Rs 50k from Non Relatives( Reason being the provisions of IT does not apply to DFT) 29www.fpgindia.org
    30. 30. Wills & Succession Planning 30www.fpgindia.org
    31. 31. Hindu Legal Heirs  Class 1 1) Son, Daughter, Widow, Mother 2) Son/daughter of Predeceased son 3) Son/Daughter of Predeceased Daughter 4) Widow of Predeceased Son  Class 2 1) Father 2) Son’s Daughter’s Son/daughter,Bro ther,Sister 3) Daughter’s Son’s son/Daughter, Daughter’s daughter’s daughter 31www.fpgindia.org
    32. 32. Legal Heirs 5) Son/Daughter/Wid ow of a Predeceased son of a Predeceased son 4) Brother’s son/daughter, Sister’s son/daughter 5) Father’s Father/Mother 6) Father’s /Brother’s Widow 7)Father’s brother/Sister 32www.fpgindia.org
    33. 33. Legal Heirs  --- 8) Mother’s father/Mother 9)Mother’s Brother/Sister 33www.fpgindia.org
    34. 34. Overview of Will  A will is the statement of Intention for disposing of the Assets and Liabilities of a person after his death.  If a Person dies Intestate, then his various assets, get divided among his Legal Heirs as per Hindu Succession Act or as the case may be.  A Will is not an Irrevocable Document. 34www.fpgindia.org
    35. 35. Wills  When one makes number of wills in respect of particular asset, it is the last will or that carries latest date that will be held valid.  Will has to be prepared properly by self signing with two witnesses, otherwise it will be held invalid  A person should clearly state in his will that s/he is of sound Mind and it is being prepared without any coercion 35www.fpgindia.org
    36. 36. Few points to Consider  You are Free to Change your existing will.  Whenever a new will is written , particulars of previous wills must be mentioned.  The name of executor/alternate executor should be mentioned in the will  Through Will Assets can be Bequeathed to specified persons with conditions attached 36www.fpgindia.org
    37. 37. Few Points to consider  A will generally make mention of all the existing assets and how the future assets ( If any) to be distributed.  It is fine if you do not give details of distribution of each and every item 37www.fpgindia.org
    38. 38. Advantages of Will “ Making a will leads not only to more efficient, easy and quick distribution of wealth among your Successors; it will also pre empt lengthy and expensive legal disputes.” 38www.fpgindia.org
    39. 39. Advantages  It provides you with Freedom in Bequeathing your assets  It is easy to reward and provide monetary benefits to relatives, friends.  It helps you to bridge a gap between Rich and poor Legal Heirs  You can Create a Annual Charge through Will which cannot otherwise be created. 39www.fpgindia.org
    40. 40. Some Terms Associated  Executor/Executrix  Witnesses  Annual Charge  Probate  Registration  Codicils 40www.fpgindia.org
    41. 41. Drafting a Valid Will  Write down all your Assets/Liabilities  Prepare a List of all those to whom you wish to bequeath something.  Match Both the above  Select Executor  Select Witnesses 41www.fpgindia.org
    42. 42. Drafting a Will  If Trust is to be created through will then full details must b mentioned  If HUF to be opened through will Full details must be mentioned 42www.fpgindia.org
    43. 43. Tax Planning Through Will  Create HUF though Will  Bequest to Minor Children  Transfer of Funds to Wife  Transfer of Funds to Daughter in Law  Through Discretionary Trust. 43www.fpgindia.org
    44. 44. Thanks --- 44www.fpgindia.org

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