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Shambhavi Suyesha
| Updated: 13 Apr, 2022 | Category: Trust

Difference between Public Trust and Private Trust

Difference between Public Trust and Private Trust
Reading Time: 4 minutes

A fiduciary relationship between a person who gives the right of the title of his property or assets to another person for the benefit of the third person is called trust, where the first, second and third person is called author, trustee and beneficiary; respectively. difference between public trust and private trust, The establishment of trust provides legal protection to the property or assets of the author. Trusts are created by the instrument of trust or trust deed. Trust should always be created for a lawful purpose. The person creating the trust is also called the trustor or settlor.

There are two types of trust, i.e., public trust and private trust, and there is a large difference between public trust and private trust.

Public Trust

Public trust[1] is created for the larger group, such as a community, etc. It is instituted for the general public. Public trust has a specific purpose.

A private trust is divided into two types, charitable public trust and religious public trust. As the name suggests, the charitable public trust is created for charitable purposes, and the religious public trust is established for religious purposes only. There can be a public trust for both charitable as well as religious purposes.

Private Trust

A private trust is created for a closed group, so here beneficiaries can be identified as friends, relatives or family of the author. It has specific beneficiaries.

Private trusts are of three types, namely revocable trust, irrevocable discretionary trust, and irrevocable non-discretionary trust. In all of them, the author decides the list of the beneficiaries. In the case of a revocable trust, the terms can be changed or terminated by the author, and in the case of an irrevocable discretionary trust, the trustee decides which beneficiary can what and how much assets, whereas in the irrevocable non-discretionary trust, the author decides which beneficiary should get what and how much of the assets.

Difference between public trust and private trust

There is a long list of the difference between public trust and private trust. The following are the main differences between them:

  • The legislative difference between the two is that the private trusts are governed by the Indian Trust Act, 1882 and the public trust is governed by the laws passed by the state where they have been incorporated or established.
  • The most important difference between public trust and private trust is that in public trust, the beneficiaries are uncertain, not known and very large in number, whereas in the case of a private trust, the beneficiaries are certain and known, such as relative, friends or family of the author of trust.
  • The difference between public trust and private trust in respect of trustees is that the public trust has a board of trustees, whereas, in the case of a private trust, there are few appointed trustees or managing trustees.
  • Public trust is more permanent than private trust. And that is why public trusts are given preference over private trusts.
  • The registration of private trust is not important, even in the case of immovable property, and for public trust, the registration is required/desirable in the case of the movable property, whereas it is mandatory for public trust to be registered in case of immovable property as per the section 11 of Income Tax Act, 1961 for exemption of taxes.
  • As per the types are concerned, the difference between public trust and private trust is that public trusts are of two types: Charitable and Religious, and private trusts are of three types: revocable, irrevocable discretionary and irrevocable non-discretionary.
  • In public trust, when an individual passes away, none of their assets or monies will go to any of the other entities unless specifically declared in a will or any legal document, whereas in the case of a private trust, when the individual dies, then their assets or monies pass away to their heirs when they leave no will behind.
  • The difference between public trust and private trust is also that when public trust is created, then it is for the public as a whole, whereas private trust is created for the benefit of a private person.
  • The public trust is open for inspection, and any person can visit such trusts anytime. People can raise questions regarding the management and purpose of the trust. There is transparency, effectiveness and utility in the case of public trust. The norms of private trusts are private, and only beneficiaries and lawyers of such trust are allowed to know about it; only the will owner is allowed to go through it, and anyone not related to it will not be able to see it.

Conclusion

Trusts are created by the author for benefiting some people, and it also ensures the legal safety of the assets or property of the author. Public trust and private trust are two kinds of trust as recognised in India. There are various kinds of differences between public trust and private trust in many aspects. The basic difference is regarding the beneficiaries as in the case of public trust, the public as large are benefited, whereas in private trust, the beneficiaries are always a specific person and person who are known to the author of trust. The right of the trust is entrusted to a trustee, and the difference between public trust and private trust regarding trustee is that in public trust, there is a board of trustees whereas, in the case of a private trust, only the managing trustee or a few authorised trustees are there. The purpose is also different in the case of public trust and private trust; in the case of public trust is limited to charitable and religious purposes. The difference between public trust and private trust in the case of their governance also as a private trust is governed and controlled by the Indian Trust Act, 1882, which is passed by the Central Government, whereas the public ones are controlled by the Acts passed by the State Government.

Read our Article:Know the Advantage of Trust Registration in India

Shambhavi Suyesha

Shambhavi holds a strong legal background, having completed her BA LLB and LLM. She is particularly interested in legal research and writing, and wishes to utilise her knowledge to create informative legal content. She is an analytical researcher and keeps herself updated about the current legal affairs. She also holds prior experience in publishing articles on assorted legal areas.

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