How to Register a Private Trust in India: Deed, Registration and the Four Certainties

A private trust is one of the simplest vehicles in Indian law to set up on paper, and one of the easiest to get wrong. The Indian Trusts Act, 1882 does not create a separate trust registry or licensing step. It sets out when a trust is created and when it is valid, and the Registration Act, 1908 decides whether the deed must be registered.

Scope first. The Indian Trusts Act, 1882 does not apply to public or private religious or charitable endowments (s.1, savings clause, Indian Trusts Act 1882). It also leaves waqf under Muhammadan law and the mutual relations of members of an undivided family under customary or personal law untouched (s.1, Indian Trusts Act 1882). This guide covers an ordinary private trust created for named beneficiaries. If you have a religious or charitable purpose in mind, a different body of law applies, and that law is made by the State. Check the law of the State where the endowment will sit. Stamp duty and State-specific registration procedure are also outside this guide.

The four certainties that create a trust

Section 6 reduces creation to a checklist. Subject to section 5, a trust is created when the author (the person who creates the trust) indicates with reasonable certainty, by any words or acts, four things: an intention to create a trust, the purpose of the trust, the beneficiary, and the trust property. Unless the trust is declared by will, or the author is himself to be the trustee, the author must also transfer the trust property to the trustee (s.6, Indian Trusts Act 1882).

The Act's own illustrations show how trusts fail on certainty (s.6 illustrations, Indian Trusts Act 1882):

• A bequest "having the fullest confidence that he will dispose of it for the benefit of C" creates a trust.
• A bequest "hoping he will continue it in the family" does not, because the beneficiary is not indicated with reasonable certainty.
• A request to distribute property among such members of a family as the recipient thinks "most deserving" does not create a trust, for the same reason.
• A direction to divide "the bulk" of property among children does not create a trust, because the trust property is not indicated with sufficient certainty.
• A bequest of a shop and stock-in-trade on condition that the recipient pays debts and a legacy is a condition, not a trust.

Draft the deed so that intention, purpose, beneficiary and property each survive a hostile reading. Name the people. Describe the property so that a stranger could identify it.

Two further rules sit beside this. The transfer of the trust property to the trustee is part of section 6 itself (s.6, Indian Trusts Act 1882). And a trust over immovable property has its own validity rule under section 5, covered below.

Who can create a trust, who can benefit, who can serve

Author. A trust may be created by every person competent to contract. It may also be created, with the permission of a principal Civil Court of original jurisdiction, by or on behalf of a minor. In each case this is subject to the law for the time being in force on the circumstances and extent in which the author may dispose of the trust property (s.7, Indian Trusts Act 1882).

Property. The subject-matter must be property transferable to the beneficiary. It must not be a merely beneficial interest under a subsisting trust (s.8, Indian Trusts Act 1882). In plain terms, you cannot settle a trust over something you cannot transfer, or over an interest that is itself only a beneficial interest in another trust.

Beneficiary. Every person capable of holding property may be a beneficiary. A proposed beneficiary may renounce the interest by a disclaimer addressed to the trustee, or by setting up, with notice of the trust, a claim inconsistent with it (s.9, Indian Trusts Act 1882). Because a beneficiary can walk away, a deed that names only one beneficiary with no alternative leaves the purpose exposed. Consider whether the deed should say what happens if a beneficiary disclaims.

Trustee. Every person capable of holding property may be a trustee. Where the trust involves the exercise of discretion, the trustee cannot execute it unless he is competent to contract (s.10, Indian Trusts Act 1882). No one is bound to accept a trust. A trust is accepted by any words or acts of the trustee indicating acceptance with reasonable certainty. Instead of accepting, the intended trustee may, within a reasonable period, disclaim, and the disclaimer prevents the trust property from vesting in him. If one of two or more co-trustees disclaims, the property vests in the others as sole trustees from the date of the creation of the trust (s.10, Indian Trusts Act 1882).

Getting each trustee's acceptance in writing, signed with the deed, is a sensible precaution. The Act says acceptance may be shown by words or acts, so a written acceptance is evidence rather than a statutory requirement.

Trustee's duty. Once the trust is created, the trustee is bound to fulfil its purpose and to obey the directions of the author given at the time of creation, except as modified by the consent of all the beneficiaries competent to contract. Where a beneficiary is incompetent to contract, consent may be given by a principal Civil Court of original jurisdiction. A trustee need not obey a direction where doing so would be impracticable, illegal or manifestly injurious to the beneficiaries (s.11, Indian Trusts Act 1882). The author's directions in the deed are therefore the trustee's operating instructions, so write them as instructions.

Lawful purpose

A trust may be created for any lawful purpose. The purpose is lawful unless it is (a) forbidden by law, (b) of such a nature that, if permitted, it would defeat the provisions of any law, (c) fraudulent, (d) involves or implies injury to the person or property of another, or (e) regarded by the Court as immoral or opposed to public policy (s.4, Indian Trusts Act 1882).

Every trust whose purpose is unlawful is void. Where a trust has two purposes, one lawful and one unlawful, and they cannot be separated, the whole trust is void (s.4, Indian Trusts Act 1882).

The Act's creditor illustration shows the practical risk. A, while in insolvent circumstances, transfers property to B in trust for A during his life and after his death for B. A is declared an insolvent. The trust for A is invalid as against his creditors (s.4, illustration (c), Indian Trusts Act 1882). State the purpose in plain lawful terms, and keep the trust's actual operation within it.

Immovable property: writing and registration

This is the rule that invalidates the most deeds. No trust in relation to immovable property is valid unless it is declared by a non-testamentary instrument in writing, signed by the author of the trust or the trustee, and registered. The only alternative is a will of the author or the trustee (s.5, Indian Trusts Act 1882).

For movable property the rule is lighter. No trust in relation to movable property is valid unless declared in the same way, or unless the ownership of the property is transferred to the trustee (s.5, Indian Trusts Act 1882). Neither rule applies where it would operate so as to effectuate a fraud (s.5, Indian Trusts Act 1882).

Registration is governed by the Registration Act, 1908. Section 17(1)(b) makes registration compulsory for non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, vested or contingent, of the value of ₹100 and upwards, to or in immovable property (s.17(1)(b), Registration Act 1908). Section 5 of the Trusts Act already requires registration for a trust of immovable property, so a deed settling land or a building has to be registered under both Acts.

For other documents, registration is optional. This includes instruments (other than wills) that create, declare, assign, limit or extinguish any right, title or interest in movable property (s.18(d), Registration Act 1908), wills (s.18(e), Registration Act 1908), and all other documents not required by section 17 to be registered (s.18(f), Registration Act 1908). A trust of movable property can therefore be valid by transfer of ownership to the trustee alone (s.5, Indian Trusts Act 1882). A registered deed is still the cleaner record of what the author intended, and you can choose to register it.

The registration clock: four months

Subject to sections 24, 25 and 26, no document other than a will is accepted for registration unless it is presented to the proper officer within four months from the date of its execution (s.23, Registration Act 1908). Where several persons execute a document at different times, it may be presented within four months from the date of each execution (s.24, Registration Act 1908).

If urgent necessity or unavoidable accident prevents presentation in time, the Registrar may, where the delay does not exceed four months, direct that the document be accepted for registration on payment of a fine not exceeding ten times the amount of the proper registration fee (s.25(1), Registration Act 1908). The application may be lodged with a Sub-Registrar, who must forward it to the Registrar to whom he is subordinate (s.25(2), Registration Act 1908). This is a discretionary route for genuine emergencies. It is not a plan.

Because section 6 requires the author to transfer the trust property to the trustee, complete that transfer at or before execution, and record it in the deed. For movable property the transfer is the transfer of ownership; for immovable property the registered deed is the instrument (s.5 and s.6, Indian Trusts Act 1882).

Step-by-step sequence

• Fix the four certainties on paper. Name the author, each trustee, each beneficiary, each item of trust property, and the purpose in lawful terms (s.6 and s.4, Indian Trusts Act 1882).
• Check capacity. The author must be competent to contract, or a minor acting with Civil Court permission (s.7). The property must be transferable to the beneficiary (s.8). A trustee who will exercise discretion must be competent to contract (s.10, Indian Trusts Act 1882).
• Draft the non-testamentary deed. It must be in writing and signed by the author or the trustee (s.5), with the author's directions spelled out for the trustee (s.11). Attach each trustee's acceptance as evidence (s.10, Indian Trusts Act 1882).
• Transfer the trust property to the trustee, unless the trust is declared by will or the author is himself the trustee (s.6, Indian Trusts Act 1882).
• Present the deed for registration within four months of execution where it deals with immovable property of the value of ₹100 or more (s.17(1)(b) and s.23, Registration Act 1908). For a movable-only trust, registration is optional (s.18, Registration Act 1908).

What to do now

Have a CA review your facts before you act or file.

• Next step: decide whether the trust is a private trust for named beneficiaries. If the purpose is religious or charitable, stop and look at the State law that applies to endowments, because the Indian Trusts Act, 1882 does not apply to them (s.1, Indian Trusts Act 1882).
• Deadline: if the deed touches immovable property, present it for registration within four months of execution (s.23, Registration Act 1908). Note the date in your calendar on the day you sign.
• Consequence of missing it or skipping registration: a trust of immovable property is not valid unless the instrument is registered (s.5, Indian Trusts Act 1882). Late presentation is possible only on the Registrar's direction, within a further four months and on payment of a fine up to ten times the registration fee (s.25, Registration Act 1908).

FAQ

Is registration compulsory for every trust deed?
Only where the statute compels it. A trust of immovable property is valid only if declared by a registered instrument (s.5, Indian Trusts Act 1882), and an instrument creating an interest of ₹100 or more in immovable property must be registered (s.17(1)(b), Registration Act 1908). A movable-only trust can be valid by transfer of ownership to the trustee (s.5, Indian Trusts Act 1882), and registration of the deed is optional (s.18(d), Registration Act 1908).

How long do we have after signing the deed?
Four months from execution to present it for registration, for anything other than a will (s.23, Registration Act 1908). A limited further window exists on the Registrar's direction, with a fine (s.25, Registration Act 1908).

Can a minor be a trustee or beneficiary?
Every person capable of holding property may be a beneficiary (s.9, Indian Trusts Act 1882). Every person capable of holding property may also be a trustee, but where the trust involves discretion, the trustee cannot execute it unless competent to contract (s.10, Indian Trusts Act 1882). A minor can have a trust created by or on behalf of him only with the permission of a principal Civil Court of original jurisdiction (s.7, Indian Trusts Act 1882).

Can a beneficiary refuse the trust?
Yes, by disclaimer addressed to the trustee, or by setting up, with notice of the trust, a claim inconsistent with it (s.9, Indian Trusts Act 1882).

Can the trustees change what the author directed?
Only with the consent of all the beneficiaries competent to contract, and where a beneficiary is not competent, with the consent given by a principal Civil Court of original jurisdiction (s.11, Indian Trusts Act 1882).

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See Also

• How to Register a Nidhi Company in India: Incorporation, NDH-4 Declaration and Member Rules