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Trust deed needs to state purpose of creation

  • There is no restriction under the Hindu Succession Act, 1956, or under the Indian Succession Act, 1925, on the persons to whom a Hindu or Sikh may bequeath his or her properties
  • You can, during your lifetime, create a trust and settle your property in the trust in which you and your sons are beneficiaries

I have three sons but I want to leave my property in the name of two of my sons. I do not want my third son, or his wife (who is in the process of divorcing him) to initiate any legal fight with my two sons over my property after I die. It is my property and I did not inherit it. What should I do to avoid any disputes?

—Gurpreet Singh Bhalla

I am assuming that you are Hindu or Sikh and thus you will be governed by the Hindu Succession Act, 1956. As per Section 30 of the Hindu Succession Act, 1956, a Hindu or Sikh may dispose of by Will or other testamentary disposition any property which is capable of being disposed of by him or her, in accordance with the provisions of the Indian Succession Act, 1925, or any other law in force that is applicable to Hindus or Sikhs. There is no restriction under the Hindu Succession Act, 1956, or under the Indian Succession Act, 1925, on the persons to whom a Hindu or Sikh may bequeath his or her properties over which he or she has full disposing power. Therefore, you can, through your Will, bequeath your assets in favour of a particular person or persons and you can bequeath your property to your two sons. You may also state the reasons for excluding a person to rule out the possibility of a challenge to the Will on the ground of fraud, coercion or undue influence.

You can also, during your lifetime, create a trust and settle your property in the trust in which you and your sons are beneficiaries. However, if the trust is created for the sole benefit of your sons and they are both “competent to contract", then, pursuant to Section 56 of the Indian Trust Act, 1882, they would be entitled at any time to ask the trustee to transfer the trust property to them or to a person of their choice. If that happens, the trust will come to an end. Therefore, it is advisable that you should also be a beneficiary of the trust during your lifetime. You could also provide in the trust deed that during your lifetime only you will be entitled to enjoy the benefits of the trust property and that after your death, your two sons will be entitled to the benefits, including the freedom to terminate the trust and distribute the trust property between them. The trust deed will have to expressly contain these details: (i) the trustees (ii) beneficiaries (iii) purpose of the trust (iv) intention to create the trust (v) trust property that is to be transferred by you to the trust at the time of creation of trust. Also, seek independent tax advice to ensure that the structure is the most tax efficient.

Marylou Bilawala is partner, Wadia Ghandy & Co. Advocates, Solicitors and Notaries. Queries and views at mintmoney@livemint.com

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