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The term “express trust” refers to an agreement that is created in precise character and typically takes the form of a written document. Express trusts are often used in common law jurisdictions as methods of preservation of wealth or enhancement. An express trust is an agreement that is derived from the wishes of the donor, or settlor in a well-documented format. This type of trust is the opposite of an unexpressed trust, which is concluded from the law or a pattern of dealings with other parties.
Generally, law requires only a simple formality to create an express trust. In certain jurisdictions, an express trust may even be stated orally. Typically, a settler would record the temperament, where the real property is to be held in trust or the value of property in the trust is large. Where legally the title to the property is being transferred to a trustee, a 'settlement deed' or 'Trust Instrument' may be used. Where the property is to be continuously held by the person making the trust, a 'declaration of trust' will be appropriate.
An express trust will have the following elements:
Any trust that has the above elements are classified as an express trust. Types of express trusts include revocable trusts, irrevocable trusts, discretionary trusts, and charitable trusts.
A trust is an agreement between the settlor and trustee, established for the benefit of a third party. In this contractual arrangement wherein the trustee of the trust holds the property or asset of the settler, for the benefit of the one or more beneficiary.
An irrevocable trust is a trust that the grantor cannot change/modify/alter/terminate after the trust deed is signed and comes into effect. This cannot be changed once the asset is transferred to the trust. The Grantor, therefore, cannot exercise control over the asset.
The major idea behind forming an irrevocable trust is that it offers ultimate asset protection from the creditors, as the asset does not become the property of the trust owner anymore.
The second reason for forming an irrevocable trust is to prevent the property from being added to the assets of the trust owner. In this way, on the occurrence of the death of the grantor, it provides full protection to the assets within the trust from estate tax.
The following features have to be present.
The following steps have to be taken to register as a private express trust in India,
The stamp paper value will be a certain percentage of the total value of the Trust’s property. Further, this percentage value varies from state to state.
After submitting the required documents, you can obtain a certified copy of the Trust Deed within one week from the registrar’s office.
Can foreigners be included as ex-officio or nominated trustees?
There will not be an issue in having foreigners as ex-officio or nominated trustees. The trust deed must be suitably drafted in the way to have Ex-Officio directors or nominated trustees.
How long can a trust can exist after its registration?
The trust after registering provides perpetual existence. A trust will cease to operate if the subject matter of the trust is liquidated. A trust cannot be dissolved once it is legitimately created.
Can an Indian Public Charitable Trust execute activities outside India?
The different acts in which an NGO can be registered do not prohibit activities outside India. In this regard, the FEMA and FCRA are silent, and, under the liberalized RBI system, current account transactions are allowed without prior authorization. There would also be no issue in foreign exchange transactions, according to FEMA guidelines.
Under section 11(1)(c) of the income tax act, it bans the operations of Indian NGOs outside India without CBDT's clear authorization. An Indian NGO spending money outside India on activities would be subject to income tax on that portion of its income.
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