1. What is Trust Deed?
The instrument by which the trust is declared is called the ‘instrument of trust’ or more popularly as the ‘trust-deed’.
2. Importance of the Drafting of Trust Deed
Drafting of the trust deed assumes utmost importance in view of the importance attached to it. As already stated, with effect from 1-4-1973, for claiming exemption under section 11, one of the conditions is that there should be an instrument creating the trust or establishing the institution. It is also provided that where the trust / institution has not been created/established under an instrument, there should be a document evidencing the creation of trust or the establishment of the institution.
3. Advantages of a Trust-Deed
Though a trust may be created orally in certain cases, however, a written trust-deed is always desirable, even if not required statutorily due to following reasons:
(a) a written trust-deed is a prima facie evidence to existence of a trust;
(b) it facilitates devolution of trust property to the trust;
(c) it clearly specifies the trust-objectives which enables to ascertain whether the trust is charitable or otherwise;
(d) a written trust-deed is essential for registration of conveyance of immovable property in the trust name;
(e) a written trust-deed is essential for obtaining registration under the Income-tax Act and claiming exemption from tax;
(f) a written trust-deed helps control, regulate and manage the working and operations of the trust;
(g) it lays down the procedure for appointment and removal of the trustee(s), his/their powers, rights and duties; and
h) it prescribes the course of action to be followed under any eventuality including determination of the trust.
4. Contents of a Trust Deed
A trust may be created by any language sufficient to show the intention and no technical words are necessary. A trust may even be created by the use of words which are primarily words of condition, but such words will constitute a trust only where the requisites of a trust arc present. Though the use of the word ‘trust’ is not needed to create a valid trust, the terms of the grant or will make it clear that an obligation is actually annexed to the ownership of the trust property.
A trust-deed, generally, incorporates the following:
(i) the name(s) of the author(s)/settlor(s) of the trust;
(ii) the name(s) of the trustee(s);
(iii) the name(s) if any, of the beneficiary/ies or whether it shall be the public at large;
(iv) the name by which the trust shall be known;
(v) the place where its principal and! or other offices shall be situate;
(vi) the property that shall devolve upon the trustee(s) under the trust for the benefit of the beneficiary/ies;
Note: In terms of section 21 of the Indian Registration Act, a deed of trust relating to immovable property, must for the purposes of registration, contain a description of the property sufficient to identify it
(vii) an intention to divest the trust property upon the trustee(s);
Note: intention. The intention should be expressed in unequivocal language and with a reasonable degree of certainty. Though no particular or technical words are necessary, yet the words used must be capable of definite meaning.
(viii) the objects of the trust;
(ix) the procedure for appointment, removal Or replacement of a trustee, their rights, duties and powers, etc;
(x) the rights and duties of the beneficiary/ies;
(xi) the mode and method of determination of the trust.