Formation of Trust

In order to start a trust, firstly one needs to know the type of trust he wants to form. The types of trusts include revocable trust, irrevocable non-discretionary and irrevocable discretionary trust. A revocable trust, also often considered as an alternative to a will, is one in which the assets are not protected as they can be withdrawn from the trust at any time. The settler himself can be the beneficiary but is taxed at the slab rate. An irrevocable non-discretionary trust allows the settlor to have absolute control over the rules of the trust, giving him/her the power to allot the various assets in the proportions he chooses. He himself or his immediate family can be the beneficiary, but if he himself is the primary beneficiary, he is charged tax at a slab rate. Irrevocable discretionary trusts allow the trustees to decide which assets get allotted and in what proportions. The settlor can only decide who the beneficiaries would be.

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