Trust and Will
Trust and Will – Planning with purpose
When securing the future of loved ones—especially individuals with special needs/PwMIs—choosing the right legal and financial frameworks makes all the difference. Trusts act as powerful instruments that enable families to plan thoughtfully, ensuring continuity, care, and protection of wealth beyond one’s lifetime.
In India, two primary types of trusts are commonly used: Private Family Trusts and Public Charitable Trusts. Although both rely on a trust deed and a trustee for governance, they differ significantly in scope, purpose, and beneficiaries.
Therefore, exploring the nuances of each trust type helps families identify the path that best aligns with their vision and values.
What is a Private Family Trust?
A Private Family Trust is a legal arrangement created by a settlor who transfers assets into the trust to benefit specific family members or individuals. Once the settlor transfers the assets, they no longer own them; however, they can still control how these assets are distributed by acting as trustee.
The trust serves two key purposes:
First, it protects assets for the beneficiary by insulating them from outside claims or disputes. Second, it ensures steady, unencumbered income for the beneficiary’s welfare, without transferring ownership or control to them.
Importantly, the beneficiary has no say in the creation or operation of the trust. They may choose whether to accept or decline its benefits. Typically, the trust concludes upon the beneficiary’s lifetime and is treated as an individual or partnership entity for income tax purposes.
Why Set Up a Private Family Trust?
Private trusts are especially useful when long-term security, control, and clarity matter most. Here’s why families choose them:
Asset Protection
Assets held within the trust are no longer considered personal holdings and remain protected from legal claims, creditors, or family disputes.
Life-long Support for Special Needs
They are ideal for families seeking to ensure ongoing financial care for loved ones with special needs—without the risks associated with direct inheritance.
Smooth Wealth Transfer
Trusts enable structured and conflict-free distribution of assets across generations, strictly following the settlor’s clear intent.
Avoids Probate
Because trust-held assets bypass court procedures, transfers occur more quickly and privately, avoiding delays or litigation.
Tax Planning
Trusts help reduce estate and capital gains taxes. Additionally, they are favoured by NRIs to avoid inheritance tax and global income clubbing abroad.
Preserving Family Intent & Values
Trusts can embody personal values and goals, supporting education, healthcare, or other specific causes over time.
Reduces Family Conflict
By clearly defining rules, the trust acts as a neutral guide that minimizes disputes and provides peace of mind.
What is a Public Charitable Trust?
A Public Charitable Trust is established to benefit the larger community rather than specific individuals. These trusts effectively pool resources to tackle social issues such as education, healthcare, and poverty alleviation. Specifically, Sumana Trust uses this model to ensure the continuity of care for persons with mental illness.
They are
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Structured for philanthropic goals
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And governed by transparency and accountability
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With inclusive development principles
Public Charitable Trusts operate based on a trust deed that clearly defines their objectives and guidelines. Moreover, they play a transformative role by serving vulnerable communities and effectively bridging the gap between government welfare programs and real-world needs.
What is a Will?
A will, also known as a “last will and testament,” is a legal document that clearly outlines how a person wishes to distribute their assets and property after death. Essentially, it serves as a roadmap for asset transfer and can include provisions for managing the estate, naming executors, and appointing guardians for minor children or children with disabilities.
Key aspects of a will include:
Distribution of Assets:
The will specifies how the testator (the person making the will) wants to distribute their property and other assets among beneficiaries.
Executor:
It can appoint an executor who takes responsibility for carrying out the testator’s wishes and managing the estate after death.
Guardianship:
Additionally, the will can name guardians for minor children or adult children with certain disabilities, ensuring they receive proper care and supervision if both parents pass away.
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Trusts:
Wills can create trusts that specifically benefit beneficiaries, especially minors, by providing financial security and well-being over time. -
Avoiding Disputes:
Furthermore, a will helps prevent family disputes over asset distribution by clearly stating the testator’s intentions. -
Legally Binding:
Importantly, wills are legally binding documents, ensuring courts enforce the testator’s wishes.Types of Wills:
There are various types of wills—including testamentary, joint, conditional, privileged, and unprivileged—each with distinct characteristics and legal requirements.Importance of a Will
Testamentary Succession:
A will enables “testamentary succession,” allowing the testator’s wishes to guide asset distribution instead of default “intestate succession” laws. -
Protecting Beneficiaries:
It safeguards beneficiaries’ interests by making sure they receive their inheritance as intended. -
Minimizing Disputes:
A well-crafted will reduces the likelihood of family conflicts and legal battles by clearly outlining the testator’s desires. -
Ensuring Desired Outcomes:
Ultimately, a will empowers individuals to control how their assets are distributed, ensuring outcomes align with their wishes rather than default legal rules.In essence, a will serves as a vital estate planning tool that helps individuals manage asset distribution and guarantees their wishes are honored after their passing.