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What are the types of trusts in India?

What are the types of trusts in India?

08-Dec-2025

Wills & Trusts

Answer By law4u team

Types of Trusts in India A trust is a legal arrangement where one party (the settlor) transfers property or assets to another party (the trustee) to hold and manage for the benefit of a third party (the beneficiary). In India, trusts are governed by the Indian Trusts Act, 1882, which regulates private and public trusts and provides the framework for their formation and management. Trusts can be broadly categorized based on their purpose, type, and the nature of the beneficiaries. Below are the main types of trusts recognized in India: 1. Private Trusts A private trust is created for the benefit of specific individuals or a limited group of people. The beneficiaries are identifiable, and the trust's purpose must be directed toward them. Private trusts are often used for family, personal, or business purposes. Discretionary Trust: In this type of trust, the trustee has the discretion to decide how and when the trust income or property should be distributed to the beneficiaries. The trustee can decide the amount given to each beneficiary based on their discretion. Specific Trust: A specific trust is created when the settlor specifies the exact amount or property to be given to a particular beneficiary. The trustee is bound to follow the instructions and distribute the trust property as directed. Resulting Trust: This type of trust arises when a trust fails, or there is a failure of the designated beneficiary. The property goes back to the settlor or their legal heirs. It results when there is an incomplete trust and the intent of the settlor is not fully fulfilled. Constructive Trust: A constructive trust is not a trust that is formally created by the settlor. It arises by operation of law when there is fraud, breach of duty, or wrongdoing, and the courts impose a trust to prevent unjust enrichment. It can also be imposed when someone wrongfully holds property that they should hold for another person. 2. Public Trusts A public trust is established for the benefit of the public at large or a section of the public, such as a charity, religious institution, or educational trust. Public trusts are commonly used for social welfare, religious, and charitable purposes. Charitable Trust: A charitable trust is created for purposes like poverty alleviation, promoting education, healthcare, or advancing religion. Charitable trusts are usually recognized by the government for the purpose of receiving tax exemptions under Section 12A of the Income Tax Act, 1961. Religious Trust: A religious trust is established to manage religious institutions, temples, churches, or mosques. It can be created to support the religious activities and functions of the institution. 3. Revocable Trusts A revocable trust allows the settlor to retain control over the trust assets and modify or revoke the trust at any time during their lifetime. The settlor can alter the trust terms, remove or replace trustees, or even dissolve the trust if needed. It is typically used for estate planning purposes. 4. Irrevocable Trusts An irrevocable trust cannot be modified, amended, or revoked by the settlor once it is created. The property transferred into an irrevocable trust is no longer owned by the settlor, and they cannot alter the terms or take back the assets. This type of trust is often used for tax planning and asset protection purposes. 5. Fixed Trusts A fixed trust is one where the settlor explicitly defines the share of each beneficiary in the trust property. The trustee has no discretion and must distribute the trust property as specified. The rights of the beneficiaries are fixed, and the terms of the trust cannot be changed. 6. Special Trusts A special trust is created for a specific purpose, and the beneficiaries are usually organizations or individuals who are involved in a particular cause or interest. Special trusts may focus on education, relief of the poor, or any other specific social, cultural, or charitable cause. Family Trust: A family trust is a special type of private trust created for managing and preserving family wealth. The primary goal is to ensure the property is passed down to future generations in a way that provides for the welfare of the family members. Unit Trust: A unit trust involves pooling the contributions of several investors into a common fund, which is then managed by a trustee. The investors are entitled to a specific share of the profits or returns on investment based on the units they hold in the trust. 7. Testamentary Trust A testamentary trust is created through a will after the death of the settlor. This type of trust is established to manage and distribute the assets of the deceased according to their wishes. The trust only becomes effective once the settlor passes away. 8. Living Trust (Inter Vivos Trust) A living trust is created during the settlor’s lifetime and becomes effective immediately. It is designed to manage the settlor’s assets while they are still alive and to distribute them after their death, avoiding the probate process. 9. Trusts for Minor Beneficiaries A trust can be created specifically for the benefit of a minor. In such cases, the trustee manages the assets and distributes the income or corpus of the trust to the minor beneficiary when they reach the age of majority or as per the settlor’s instructions. Conclusion Trusts are powerful tools for asset management, estate planning, and achieving social, charitable, or religious objectives. The types of trusts available in India offer flexibility for various purposes, from private family wealth management to public charitable work. Each type of trust serves a different need, and it is crucial to understand the specific benefits and limitations associated with each one.

Answer By Anik

Dear client, A trust is a mechanism by which a third party is made as a trustee for the purpose of holding and managing assets on behalf of one or more beneficiaries. Trusts are established by a settlor or author of the trust who transfers property to the trustee under particular terms and conditions according to which the assets are to be managed and distributed. Trusts are commonly used for the following purposes including estate planning, asset protection, tax planning and charitable purposes. Types of Trust The trusts in India are broadly classified as private and public trusts. 1. Private trust : It is established for the benefit of one or more specific individuals who could be clearly identified. The beneficiaries are an individual(s) that are identifiable. The Indian Trusts Act of 1882 governs private trusts in India. These trusts can be created during the lifetime of the settlor (inter vivos) or by way of a will. They include the following types: a. Revocable Trusts: It allow the author to have control over the trust assets and can also modify or terminate the trust during their lifetime. b. Irrevocable Trusts: Once established, these trusts cannot be modified or revoked by the author. They are often used for estate planning and asset protection. They are irrevocable c. Discretionary Trusts: It vests powers with the trustees as to the distribution of assets among the beneficiaries. The trustees decide how the trust income and capital are to be distributed among the beneficiaries. This provides flexibility in managing the assets and distributions. d. Fixed Trust : Unlike discretionary trust, here it is the author who decides the shares of the beneficiaries The shares of the beneficiaries are pre-determined and fixed in the Trust deed and this ensures predictable and structured asset distribution. e. Testamentary Trusts: It is created through a will and they come into effect upon the death of the settlor. They are often used to manage and protect assets for minors or beneficiaries with specific needs. 2. Public trust : It is established primarily for the benefit of the general public or a significant portion of it. The beneficiaries are usually an indeterminate group of people. These trusts are typically charitable or religious in nature and are governed by general law. Public trusts can also be created inter vivos or by will. It includes the following types a. Charitable Trusts: It is established for charitable purposes as they aim to benefit the public or a significant portion of it. They can be set up for various causes such as education, health, religion or social welfare. b. Special Needs Trusts: It is designed to provide for the needs of individuals with disabilities without affecting their eligibility for government benefits. Here the beneficiaries are people with disabilities and this ensures they receive some kind of financial benefit. c. Religious Trusts: It is established for the managing religious institutions like temples, churches etc. It could be created for supporting religious activities and functions To conclude trusts in India are broadly classified into public and private trust. Each type of trust serves a different purpose and has its own set of rules and regulations. I hope this answer was helpful. For any further queries please do not hesitate to contact us.

Answer By Ayantika Mondal

Dear client, Trusts in India are broadly classified into private trust and public trust, and the distinction mainly depends on who the beneficiaries are. A Private Trust is created for the benefit of specific, identifiable individuals and is governed by Indian Trust Act, 1882. These trusts can be created during the lifetime of the settlor (inter vivos) or by way of will. Private trust may be of various categories, such as: 1. Simple trust: here the trustee's role is limited and mainly involves transferring property to the beneficiaries. 2. Special or active trust: here the trustee has active duties such as managing, safeguarding, and distributing trust property. 3. Revocable and irrevocable trust: depends on whether the settlor retains the right to modify or cancel the trust. 4. Testamentary trust: it is created through a Will that comes to an effect after the demise of the settlor. They are often used to protect the estate for minors, beneficiaries with specific needs. 5. Discretionary and fixed trust: The initial one tells about the discretionary power of the trustee over the estate and the income and capital on how it will be distributed among the beneficiaries. The latter one is totally opposite of the discretionary trust. In fixed trust the author pre-decides the distribution of the estate among the beneficiaries. A Public Trust is created for the benefit of the public or for a large section of a society and is governed by state specific public trust laws or principles of charitable and religious endowments. The following are the types of public trust: 1. Charitable Trust: Established for purposes like education, medical relief, etc. 2. Religious Trust: Established for managing religious institutions, like temples, church, mosques or to support religious activities. In short, private trust serves specific persons, and public trust serves the society at large. I hope this answer was helpful. For further queries, please do not hesitate to contact us. Thank you.