Difference Between Public and Private Trust: An individual, referred to as the trustor or settlor, transfers the title of their property or assets to another individual, referred to as the trustee, for the benefit of a third party, referred to as the beneficiary. This fiduciary relationship is known as a trust. The author’s property is legally protected by this arrangement. A trust deed or other instrument creates the trust, and it must always have a legitimate purpose.
There are two different types of trusts: private and public trusts. The essence and extent of public and private trusts are the main distinctions between them. Whether a trust is public or private, it must be established within a rigorous legal framework that protects the interests of all participants. This blog post highlights the primary distinction between public and private trust.
What is Trust Registration?
Before delving into the distinctions between private and public trust, let’s clarify what trust registration is. Section 3 of the Indian Trusts Registration Act, 1882 defines a trust as a legal duty that is closely related to the ownership of assets and results from a trust that the proprietor has either expressly proclaimed and accepted or has been ingrained in them.
This duty is created for the benefit of one or more designated parties, which may include the owner himself as well as another party. In essence, what happens is that property is transferred from one party—the settlor—to another—the “trustee,” who takes on the duty of looking after the property for the benefit of one or more beneficiaries.
The primary idea is that the settlor needs to formally and legally give the trust trustee ownership of the contested assets. Within Indian legal norms, the trust structure is the second most common registration modality. It offers a framework for the efficient administration of property for the ultimate benefit of designated individuals or entities.
Difference Between Public Trust and Private Trust
Given below are the main points of difference between private trust and public trust:
| Aspect | Public Trust | Private Trust |
| Legislative Governance | Governed by laws enacted by the state where established. | Governed by the Indian Trust Act, 1882. |
| Beneficiaries | Uncertain, many, and not specifically known. | Beneficiaries who are known and identifiable; are typically the trustor’s friends, family, or relatives. |
| Trusteeship | Managed by a board of trustees. | Managed by a small group of managing or appointed trustees. |
| Duration and Preference | Generally more permanent and given preference over private trusts. | Generally of a more temporary nature. |
| Registration Requirements | Mandatory registration for immovable property; desirable for movable property for tax exemptions. | Registration is not needed, even for immovable property. |
| Types of Trusts | Charitable and Religious. | Revocable, Irrevocable Discretionary, and Irrevocable Non-discretionary. |
| Distribution of Assets After Death | Open for inspection; anyone can scrutinize the management and purpose. | Assets pass to heirs in the absence of a will. |
| Purpose and Scope | Created for the benefit of the public as a whole. | Established for the benefit of private individuals. |
| Transparency and Inspection | Open for scrutiny; anyone is welcome to examine the purpose and management. | Norms are private; only beneficiaries, lawyers, and the trustor have access. |
Parties in a Trust
The parties in a trust are:
| Role | Description |
| Author/Settlor/Trustor/Donor | The individual seeks to transfer their assets and entrusts someone with the creation of a trust. |
| Trustee | The person who accepts the confidence to produce the trust. |
| Beneficiary | Who will benefit from this trust in the future. |
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Understanding Public Trust
Establishing public trust serves a specific function for the broad public or the greater community. It meets the needs and promotes the well-being of the general public.
Types of Public Trust
There are two sorts of private trusts: religious public trusts and charity public trusts. The religious public trust was established only for religious purposes, while the charitable public trust was established for charity purposes. A public trust that combines religious and charitable goals is also conceivable.
Understanding Private Trusts
Understanding the concept of private trust is crucial before discussing the distinctions between public and private trust.
Definition of Private Trust
The enforceability of a private trust rests with specified third parties referred to as beneficiaries, and it is created solely for the benefit of one or more individuals. The particular deeds establishing private trusts list the beneficiaries and guarantee that the property allotted is used for the intended purpose, benefiting only the people listed in the deed.
Types of Private Trust
Revocable and irrevocable trusts are the two most significant categories of private trusts.
1. Revocable Trusts
Revocable trusts give the person establishing the trust—referred to as the trustor—the ability to modify the conditions or terminate the trust after it has been established.
2. Irrevocable Trusts
There are two kinds of irrevocable trusts: irrevocable discretionary trusts and irrevocable non-discretionary trusts.
Irrevocable Non-discretionary Trusts: In this kind, all authority over the trust terms remains with the trustor.
Irrevocable Discretionary Trusts: In contrast, the trustee of an irrevocable discretionary trust is free to designate beneficiaries as they see fit.
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Conclusion
The operational functions and legal foundations of public and private trusts differ significantly. Private trusts, administered by the Indian Trust Act, have known beneficiaries, specified trustees, and a more private nature, whereas public trusts, managed by state legislation, are for indeterminate numbers of beneficiaries with transparency and permanence.
These trusts have certain tasks and goals that are further defined by their tenure, registration procedures, and distribution of assets upon death. To ensure that their intentions and legal obligations are in line with the intricacies of trust establishment and management, people must be able to distinguish between private and public trust.