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How Private Trusts Work in India:
Structures, Requisites, and Uses
Prashant Joshi
May 28, 2026
10 Min
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A will takes effect only on the death of the person who made it. It may need to pass through probate, which can take time and places the family’s arrangements on public record, and it can be contested by a family member who feels left out. For a family with an operating business, heirs in more than one country or a dependent who will need lifelong care, these limitations can be significant.
The private trust is the instrument that Indian families most often use to plan around them. Assets that are settled into a trust during the settlor’s lifetime sit outside the will, and their management and distribution follow the terms that the settlor has laid down.
A private trust is constituted for the benefit of one or more individuals who are, or within a given time may be, definitely ascertained. Its central feature is the separation of legal ownership from beneficial enjoyment, in which the trustee holds and manages the assets as their legal owner and the beneficiary receives the income or the principal.
Trusts created during the settlor’s lifetime are governed by the Indian Trusts Act, 1882, while those created by will fall under the Indian Succession Act, 1925.
A trust involves several parties and two principal documents. The settlor sets up the trust, contributes the assets and defines its objectives, and the trustee, who may be an individual or a corporate fiduciary, administers those assets on behalf of the beneficiaries. The trust deed is the governing document and covers the objectives of the trust, the terms on which it will be managed, the rules for distribution and the role of each party.
Many settlors also write a letter of wishes, which is a non-binding document that records how they would like the trustees to exercise their discretion. A trust advisor may be appointed to guide the trustees on management and administration, and this role becomes especially important after the settlor’s lifetime, when the trustees can no longer consult the person who set out the original intent.
A revocable trust allows the settlor to alter or cancel the arrangement during their lifetime. It offers full flexibility but limited protection, because the settlor retains the ability to take the assets back, and families generally use it for incapacity planning or to keep specific assets outside the will.
An irrevocable determinate trust cannot be revoked, and the beneficiaries and their respective shares are fixed in the trust deed, which gives each beneficiary an absolute entitlement. This structure is suited to the transfer of specific assets to known heirs.
An irrevocable discretionary trust also cannot be revoked, although the beneficiaries or their shares are left open and distributions are decided by the trustee. Since no beneficiary holds a fixed claim on the assets, this structure offers the strongest protection of the three and is generally chosen by families who wish to provide for future generations.
The choice among these structures depends on how much control the settlor is prepared to give up and on what the trust is intended to protect against.
Five elements must be present together for a private trust to be valid. The settlor must make an unequivocal declaration of the intention to create the trust, and legal ownership of the property must pass completely to the trustee. The trust property must be clearly identified, the purpose of the trust must be lawful and precisely stated, and the beneficiaries must be particular persons who can be definitely ascertained.
A trust that falls short on any one of these requirements is open to challenge, which is why the transfer of assets into the trust deserves as much attention as the drafting of the deed.
Among business families, the most common use of a trust is to preserve continuity of control. Promoter equity is consolidated within the trust so that the shareholding does not fragment with each generation, and the deed can separate management control, which is exercised through voting rights, from economic benefit. This allows many family members to share in the family’s wealth while decisions remain with those who are equipped to take them.
Families with heirs living abroad use trusts to manage their cross-border exposure. Where a beneficiary resides in a country that taxes inherited estates, such as the United States, holding Indian assets in an Indian trust can simplify reporting and may reduce that exposure, although this requires advice in both jurisdictions.
Professionals and business owners who carry personal liability use irrevocable trusts to hold family wealth separately from their professional risk. This protection depends on the trust being settled in good faith and well ahead of any claim, since transfers that are made to defeat existing creditors can be set aside.
For minors and for dependents with special needs, a trust provides for education, medical needs and lifelong maintenance through trustees and guardians, without large sums being placed directly in the hands of the beneficiary.
The decisions that determine whether a trust works as intended are taken before the deed is drafted. They include the choice of structure, the assets to be settled, the selection of trustees, the appointment of an advisor to guide the trustees after the settlor’s lifetime, and the level of guidance that the letter of wishes should carry.
Tax treatment differs from one structure to another and should be considered at the same stage. Families that give adequate time to these questions are better placed to ensure that the trust carries out their intentions over the long term.
Upwisery’s Family Office team advises families on the design and setting up of private trusts.
