A will and a trust are two distinct legal agreements used to control the disposition of assets upon death. Despite the fact that both documents have the same goal, there are some key differences between them. A will is a legal document that specifies how a person’s property, possessions, and personal assets will be dispersed to his or her lawful heirs upon death. While on the other hand, A trust is described as a legal arrangement in which the trust owner designates a trustee to manage the asset on their behalf. The beneficiary is a second party who benefits from the trust. It enables a person to choose beneficiaries for his assets both before and after his death. The trust deed is the legal instrument outlining the trust’s provisions; the subject matter of the trust is referred to as trust property.
Many people get confused by the two because they are both used to distribute and manage a person’s assets. The main distinction between a will and a trust, however, is that while the former takes effect following the death of the will owner, the latter does so immediately upon creation. Before making any decisions, it is vital to comprehend the difference between a Will and a Trust because each has advantages and downsides of its own. In this write-up, we will discuss the difference between a Will and a Trust.
What is a Will?
A will, as the term implies, refers to desire. An individual, known as the testator, declares their desire for the transfer of their property upon death through a legal document known as a will or testament. They also choose one or more people, known as the executors, to oversee the estate’s administration until its final distribution. The term “testator” refers to the individual who wrote the will. The testator may designate an executor to manage the distribution of his wealth to his legal heirs.
After the testator passes away, the will goes through probate, during which the court ensures that the maker’s final desires are correctly followed out. Additionally, it could specify how the testator’s asset should be used after his death.
Only after the testator passes away does the will go into effect. Before passing away and while still of sound mind, the testator has the power to cancel or modify the will at any moment. The “latest will” of a person who has made many wills for the division of his property will be carried out. Without a will, a person’s assets pass to his or her rightful heirs in accordance with inheritance law. Legal heirs in this context include children, a spouse, a parent, etc.
The Indian Succession Act, 1925’s rules apply to a Hindu, Buddhist, Sikh, or Jain’s will. Mohammedans, on the other side, are not bound by the Indian Succession Act of 1925 and are free to dispose of their property in accordance with Islamic law.
Why is it vital to make a will?
As per Indian laws, there are many advantages of executing a will, and these are as follows:
- A well-written will can prevent family disputes over the testator’s assets, and in the event that they do, the recipient of the estate will be armed with a strong legal instrument.
- The law of inheritance does not take into account the deceased’s wishes regarding who should receive his property and in what proportion, whereas through a will, the testator can divide the property as he sees fit.
- Although it has occasionally been observed that the deceased had both movable and immovable property, which his inheritors may not be aware of, a Will assures that both types of property are distributed by the testator properly during his lifetime.
- For the transfer of the real estate, bank deposits, stocks and shares, and company interests, it is currently a very common legal necessity. The legal criteria are met with the help of a properly designed and registered will.
- The Will assures that no false claims arise after the testator’s death.
Eligibility criteria for making a will
As per Indian laws, the following persons are eligible to make a will:
- The testator must be mentally sound;
- He should not be subject to any coercion or undue influence;
- It should be a voluntary act to create a will;
- The testator should be completely aware of the provisions of the will.
What are the essentials of a will under Indian law?
To make sure your will is enforceable, kindly check that your will has the following essential elements/provision:
- The name and address of the testator should be included in the will.
- The necessity to make the will should be clearly stated, as well as the fact that the testator is of sound mind and is making the will voluntarily and without coercion.
- Use of clear wording in the estate’s bequest.
- It is important to include the name of the executor – the person the testator designated to carry out their desires.
- The Will must be signed by the testator and witnessed by two witnesses, with the schedule of properties attached.
What is the need behind registering a will?
Even while a will can be written on plain paper and is not required to be registered, it is nevertheless advisable to do so. Wherever the testator resides, they can register with the Registrar of Assurances. The testator’s executor or legatee may register the will during the testator’s lifespan or after the testator’s death. Any subsequent adjustments must also be registered. Registration of the Will assures that it cannot be altered, establishes its legitimacy, disproves claims that it was created under duress, and may prevent the need for probate when changing leasehold properties.
How to enforce a will in India?
The executor may enforce a will. He is in charge of protecting the beneficiaries’ rights under the Will. The Indian Succession Act’s clause mandates that only a Probate can be used to enforce a will’s rights. However, Hindus in India are exempt from this restriction unless their housing stock is located in Kolkata, Mumbai, or Chennai. Probate is the legal term for a court’s certification of a will as valid.
What is a trust?
A trust is defined as an obligation that is attached to property ownership and results from a confidence reposed & accepted by the owner for the benefit of another person & owner under the Indian Trusts Act of 1882. Therefore, a trust is a gift of property from one person to another that is meant to be managed for the benefit of the owner and/or others. The trust’s author or settlor is the individual who is transferring the property.
The person to whom the property is being transferred, on the other hand, is the trustee. The beneficiary is the individual who ultimately receives the benefits, and the asset in question is known as the trust asset.
A settler needs to be educated and intelligent. With the Court’s approval, he or she may also be a minor. Anyone who is above 18, of sound mind, and not bankrupt may serve as a trustee. However, he or she has to be able to sign contracts in order to manage the trust’s assets.
Trusts are usually established for real estate management needs. Both moveable and immovable items may be considered as trust property. If the property is immovable, the settlor must sign a formal, registered instrument transferring ownership to the trustee. There is no requirement for a formal document when it comes to moveable property. It is sufficient to deliver the property to the trustee
A trust may be thought of as a three-party fiduciary arrangement, to put it simply. In this, the first party (the trust’s author) often transfers property—often money, though not always—to the second party (the trustee) for the third party’s advantage (the beneficiary).
Consequently, trustees have a responsibility to operate the trust in the best interests of the equitable owners.
A trustee’s obligations include:
- Exercising Caution,
When referring to a trust, a property does not always have to be something related to real land. When discussing a trust, the term “property” might refer to money, stock, or any other valued item.
Finally, there has to be a document that can be used to announce or really construct the trust. The trust deed or “instrument of trust” is the name of this document.
What are the objectives of a Trust?
All aims and objectives are deemed to be permissible to establish a trust, according to Section 4 of the Indian Trusts Act of 1882, unless they are:
- Is prohibited by the law
- Is dishonest or connected to dishonesty
- Is immoral
- Violates any provision of the law
- Contrary of public policy
- Injured another individual or his property
Types of Trust’s that can be created in India
Private Trusts – These trusts are for a closed group. In other words, we might argue that these types of trusts allow for the identification of beneficiaries. For instance, a trust established for a friend or a member of the author’s family.
Public Trusts – These are often established for the benefit of the general public. These trusts do not allow for the identification of the final beneficiaries. For instance, philanthropic organisations or non-governmental organisations.
The Indian Trusts Act of 1882
An Act pertaining to private trusts and trustees in India is the Indian Trusts Act. According to the act, trustees are defined as well as what is meant by the term “Trust” and who is eligible to hold that position lawfully. The following are some of the crucial aspects covered by the act:
Under chapter two: The creation of trusts
Section 4 of the Indian Trust Act of 1882 discusses about the lawful purpose.
Section 5 of the Indian Trust Act of 1882 discusses about the trust of immovable property & trust of moveable property.
Section 6 of the Indian Trust Act of 1882 discusses about the creation of a trust.
Section 7 of the Indian Trust Act of 1882 discusses about the who may create trusts.
Section 8 of the Indian Trust Act of 1882 discusses about the subject of trust.
Section 9 of the Indian Trust Act of 1882 discusses about the who may be beneficiary. Disclaimer by beneficiary.
Section 10 of the Indian Trust Act of 1882 discusses about the who may be trustee.
Under chapter three: The duties and liabilities of trustees
Section 11 of the Indian Trust Act of 1882 discusses about the trustee to execute trust.
Section 12 of the Indian Trust Act of 1882 discusses about the trustee to inform himself of state of trust-property.
Section 13 of the Indian Trust Act of 1882 discusses about the trustee to protect title to trust-property.
Section 15 of the Indian Trust Act of 1882 discusses about the care required from trustee.
Section 16 of the Indian Trust Act of 1882 discusses about the conversion of perishable property.
Section 17 of the Indian Trust Act of 1882 discusses about the trustee to be impartial.
Section 18 of the Indian Trust Act of 1882 discusses about the trustee to prevent waste.
Section 19 of the Indian Trust Act of 1882 discusses about the accounts and information.
Section 20 of the Indian Trust Act of 1882 discusses about the investment of trust-money.
Section 30 of the Indian Trust Act of 1882 discusses about the indemnity of trustees.
Under chapter four: The rights and powers of trustees
Section 31 of the Indian Trust Act of 1882 discusses about the right to title-deed
Section 34 of the Indian Trust Act of 1882 discusses about the Right to apply to Court for opinion in management of trust-property.
Section 35 of the Indian Trust Act of 1882 discusses about the right to settlement of accounts.
Section 36 of the Indian Trust Act of 1882 discusses about the general authority of trustee.
Under chapter seven: Vacating the office of a trustee
Section 70 of the Indian Trust Act of 1882 discusses about the office how vacated.
Section 71 of the Indian Trust Act of 1882 discusses about the discharge of trustee.
Section 72 of the Indian Trust Act of 1882 discusses about the petition to be discharged from trust.
Section 73 of the Indian Trust Act of 1882 discusses about the appointment of new trustees on death, etc.
Section 74 of the Indian Trust Act of 1882 discusses about the appointment by Court and the rule for selecting new trustees.
Under chapter eight: The extinction of trusts
Section 77 of the Indian Trust Act of 1882 discusses about the trust how extinguished.
Section 78 of the Indian Trust Act of 1882 discusses about the revocation of trust.
Limitation of establishing a trust
Although establishing a private trust is a popular choice since it benefits big families and other scenarios, there are certain limits to consider. In terms of cost, the cost of establishing a trust varies by state since stamp duty is paid at the rate determined by each state. The proper nomination of good trustees is critical to the success of a trust. Even one poor trustee selection can have serious consequences for the trust’s primary goal. A trust deed is equally difficult to draught. If the purpose of the text is unclear, it is difficult to implement or carry through. A will, in fact, is thought to be less complicated to prepare than a trust deed. After discussing the meaning of a Will and a Trust, let’s discuss the main difference between a Will and a Trust.
Difference Between a Will and a Trust
Following is the difference between a Will and a Trust:
- What do wills and trust do?
Will: a legal document that specifies who will get your possessions and assets after your passing.
A trust is a legal structure in which a “trustee” (someone you choose) oversees and keeps title to your property and assets while distributing income to beneficiaries you choose.
Both wills and trusts are official estate planning tools that allow you to specify in advance what will happen to your house, money, and even child custody when you pass away. While both wills and trusts have benefits and drawbacks, a sound estate plan will use both to effectively preserve your wealth.
- When do wills and trusts take effect?
Will: Your will determines who will inherit your property and assets after your death.
Trust: permits you to transfer property and assets while you are still alive and takes effect as soon as it is signed.
A trust’s ability to start distributing property before death, at death, or even later is one benefit of using one. This is not always advantageous or significant, but it offers a degree of flexibility that a will simply cannot.
- What property can be inherited through wills and trusts?
Will: Will only cover assets that are registered in the deceased person’s name. You cannot give away something you don’t possess (except in certain instances).
Trust: only applies to assets that have been given to and registered in the name of the trust.
- How mental disability affects wills and trusts?
Will: Only takes effect after your death, therefore, it is unaffected by mental incapacity or impairment.
Trust: Some trusts, such as revocable living trusts, enable you to transfer property and assets while you are still alive and can contain provisions in case you become handicapped or incapable.
- Wills require probate; trusts don’t.
Will: Before transferring assets to beneficiaries, property must first go through probate.
Trust: Assets and property placed in a trust avoid probate.
- Wills become public record; trusts are private.
When they are filed to the court for the probate procedure, they will: become a part of public record.
Trusts are secret and only known to those engaged because there is no necessity to file a trust.
A will and a trust are two distinct legal agreements used to control the disposition of assets upon death. Despite the fact that both documents have the same goal, there are some key differences between them. Many people get confused by the two because they are both used to distribute and manage a person’s assets. The main distinction between a will and a trust, however, is that while the former takes effect following the death of the will owner, the latter does so immediately upon creation. Before making any decisions, it is crucial to comprehend the Difference Between a Will and a Trust because each has advantages and downsides of its own.
Read our Article:Know The Advantage Of Trust Registration In India