The document discusses trusts and wills under Indian law. It defines a trust and outlines the key parties - author/settlor, trustee, and beneficiary. It describes different types of trusts like specific, discretionary, public and private trusts. It also discusses wills and succession planning for Hindus, including legal heirs. Key points covered include drafting a valid will, advantages of wills, terms associated with wills, and tax planning opportunities through trusts and wills.

1. Trusts
&
Wills
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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.
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3. Parties in Trust
 Author/Settlor
 Trustee
 Beneficiary
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4. Terms Related to Trust
 Trust property/Trust Money
 Beneficial Interest
 Instrument of Trust
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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*
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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
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7. Types Of Trusts (1)
 Specific Trust
 Discretionary Trust
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8. Types Of Trusts (2)
 Public Trust
 Private Trust
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9. Types Of Trusts (3)
 Executed Trust
 Constructive Trust
 Resulting Trust
 Simple Trust
 Special Trust
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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.
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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
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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
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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
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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 .
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15. Private Trust For Spouse
 Settler Should not be:
1. Husband
2. Father/Mother –in-Law
 No Restriction on Trustees
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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.
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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.
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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.
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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
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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
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21. Private Trust for Aged parents
 To Support Old Parents with no sizeable
Income.
 No Clubbing
 No Restriction on Investments.
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22. 100% Specific Beneficiary Trust
For Senior Citizens
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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.
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24. Tax Planning through
Discretionary Trust
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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.
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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.
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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
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28. Taxation
Discretionary Family Trust
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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)
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30. Wills &
Succession Planning
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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
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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
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33. Legal Heirs
 --- 8) Mother’s
father/Mother
9)Mother’s
Brother/Sister
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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.
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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
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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
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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
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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.”
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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.
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40. Some Terms Associated
 Executor/Executrix
 Witnesses
 Annual Charge
 Probate
 Registration
 Codicils
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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
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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
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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.
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44. Thanks
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