Private Trusts Vs HUFs: Which suits your needs to pass on assets to legal heirs?
assets to family members. Some of the commonly used routes to pass on assets are: Will, gift and Private Family Trusts. Apart from these, even a Hindu Undivided Family (HUF) can play an important role in passing on of assets to one's family members.
Unlike a Will and gift, both trusts and HUFs take into account the needs of the owner of the assets during his lifetime, the family structure, the nature of assets, the requirement of family members, preservation of wealth, smooth succession and so on.
Trust and HUF have some similarities and differences. Depending on the intended beneficiaries, an individual can decide between a trust and HUF or use both, if will or gift deed does not suit the requirements.
Private family trusts
A Trust is a legal arrangement through which the owner of the asset transfers the property to the Trust for the benefit of one or more beneficiaries. The trustee holds the property in representative capacity on behalf of the beneficiaries and not for his personal benefit. The person who transfers the assets is called the author or settlor of the Trust.
The person appointed by the settlor to administer the Trust is called the trustee. The person/s for whose benefit the Trust is formed is/are called the beneficiary/ies. The instrument by which the Trust is declared is called the «instrument of trust» (commonly known as the trust deed).
Do note that a beneficiary may also be the trustee of the Trust. The share of the beneficiary/ies could be at the discretion of the trustee/s or a fixed share specified by the settlor.
A private Trust can be set up as a revocable or irrevocable Trust, with shares of the beneficiary being either discretionary or determinate. A revocable trust can be revoked
