Trust (Legal)
Personal FinanceA trust is a legal arrangement where assets are held by a trustee for the benefit of beneficiaries. In personal finance, trusts are used for estate planning -- ensuring assets pass smoothly to intended beneficiaries, especially minor children or special needs dependents, outside the probate process.
In detail
Types of trusts in India:nPrivate Trust: for family wealth transfer (governed by Indian Trusts Act 1882)nPublic Charitable Trust: NGO structure (80G benefits for donors)nSpecific Disability Trust: for special needs dependentsnnWhen a private trust is useful:n1. Minor children heirs: trust holds assets until children reach specified agen2. Special needs child: trust ensures lifelong financial caren3. Complex family situations: multiple wives, estranged family members, complex business successionnnFor most people: a well-drafted will + proper nominations is sufficient. Trust is for complex situations requiring ongoing management.
Real-life example
Arun has Rs 2 Cr mutual fund portfolio and two minor children (aged 5 and 8). He creates a private family trust, names his wife as trustee and two children as beneficiaries. On his death: wife manages the portfolio as per trust deed (cannot sell principal before children turn 25). This prevents the estate from being mismanaged or contested.