Looking Ahead & Beyond by

Module Framework • • • • • •

WHY do we need to plan beyond us? WHAT are your concerns with regards to your child after you? HOW can we address their needs after us? – The choices WHICH would be the correct choice? WHEN/HOW do we need to decide? WHERE do we go for assistance?

Audience Discussion

• WHY do we need to plan beyond us? • WHAT are your concerns with regards to your child after you?

HOW can we address their needs after us? – The Choices

Private Trust

Bank Executor Company Beneficiary Fund Through an Existing NGO

WHICH would be the correct choice?

Let’s understand each choice & The pros & cons of the choice

Understanding Private Trust • It transfers private wealth and assets & properties from individual/s into a ‘legal obligation’ for the benefit of a named ‘beneficiary’. • Members of the family or friends can be appointed as trustees who would be in control and management of the trust but have no beneficial interest in the trust beyond reasonable remuneration as trustees • The funds, assets & properties would be held in trust and must be managed and used only as per directives given in the trust deed • The trust deed would be the main instrument creating the legal obligation. • Trust deed must be on stamp paper and can be registered with the registrar of deeds (sub-registrar’s office)

Private Trust • •

• • •

Pros Benefit is only enjoyed by the named beneficiary Trust is irrevocable and in perpetuity or till final object is fulfilled. Trustees cannot derive any personal benefit from the trust Beneficiary’s interest is safeguarded High Court is the ‘guardian’ of all trusts

Cons • Trustees may grow old, die or get disinterested over time • Trustees would have responsibility to keep proper accounts and file annual tax returns • Unless thoughtfully drafted any change in the deed would require a court order

Understanding Bank Executor Company • Banks like Central Bank of India and State Bank of India offer ‘Trusteeship Services’. In other words the Bank’s Executor Company takes on the role of ‘Trustee’ and manage the trust as per trust deed. • The Executor Company would manage all the investing, accounting and disbursement to the beneficiary • There would be a ‘management fee’ … generally depending on the size and nature of the trust

Bank Executive Company Pros • Long established institution and with long experience • Takes away individual responsibilities that trustees would be burdened with • Recognized and reliable and under auspices of leading Nationalized Bank

Cons • Generally slow and at times bureaucratic • Investments could be made by company in high risk stocks unless the trust deed directs mode of investment

Beneficiary Fund Through an Existing NGO • Often there are support groups (e.g.: Ahura Support) registered either as a Public Trust or a Society or a Section 8 Company and whose object is to cater to the needs of beneficiaries like special children. A fund could be created in the name of the beneficiary and managed by the support group. • Example: Ahura Support opens a Bank Account titled “Ahura Support-- (name of beneficiary) Benefit fund”. A separate ‘cost centre’ or ‘separate ‘company account’ or Personal Ledger would also be opened in Ahura Support’s accounting software to track and manage the funds as per wishes of the parents

Beneficiary Fund Through an Existing NGO • • • •

Pros Ease of opening the fund Would be in-house Better control and oversight Ease of pulling out in case things don’t work out

Cons • The support group may not have the experience or the technical and human resources to manage the fund efficiently • The health and efficiency of the Support Group would depend on the leadership (trustees of that time)

WHEN/HOW do we need to decide? The time for doing anything important is Be tuned into what others in a similar situation are planning but do not have the ‘herd mentality’. Always seek expert advice. You would be the best judge of when the time is appropriate depending of factors such as your own age, health, other dependencies, financial position etc.

WHERE do we get more guidance? • Private Trust – CAP, CA, Lawyers • Bank Executor Company – Bank Central or State Bank • Beneficiary Fund – Any NGO that is willing to host it

(022) – 22846534

www.capindia.in [email protected]

The End

Disclaimer Where legal issues are concerned, one can seldom offer a standard response or solution that serves all. Problems, needs, responses and solutions for these are often case specific. Therefore, it is best to read what Centre for Advancement of Philanthropy (CAP) has elaborated here as a broad and generalised note. Consultation with the experts at CAP is recommended for specific legal or fiscal issues.

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