The Trust must be formed for charitable purpose. Charitable purpose have been defined to include relief of poverty, advancement of education, advancement of religion and other purpose beneficial to the community not failing under any of these preceding heads.
A charitable trust in order to be charity in the legal sense, will have to be for purpose of a public nature in other words for the benefit of the community or some part of it. When the beneficiaries of a trust constitute general public or a section of public, as distinguished from private individuals and when the trust is meant to perform a public charity, it is public charitable trust.
The instrument by which trust is created is called as Trust Deed. Although it is not mandatory for trusts to enter into agreement, since trusts can be formed even by oral communication except in case of trust with immoveable property which is required to be created by a instrument in writing. It is mandatory to get the deed registered under the Income Tax Act for availing the exemptions such 12A, 80G etc., and more over a deed is a evidence of the existence of a trust.
Contents of a Trust Deed
- Name(s) of the author(s)/settlor(s) of the trust.
- Name(s) of the trustee(s).
- Name(s) of the beneficiary ,if any
- Proposed name of the Trust
- Place where its principal and other offices shall be situated.
- The property that shall devolve upon the trust for the benefit of the beneficiary.
- The objects of the trust.
- The manner of appointment, removal or replacement of a trustee, their rights, duties and powers etc.
- The rights and duties of the beneficiary
Procedure for Formation
A Trust may be declared either by will or by a non-testamentary instrument called as Trust Deed. A Trust in relation to immovable property can be created also by transfer of ownership of that property to the trustee.
A Trust can be created by any of the following ways:
- Instrument of Trust Deed
- Creation by Will
- Creation by Transfer of Property