Trust Deed

Trust Deed or Deed of Trust, whichever way is called is an agreement between borrower & lender. In a broad sense, it can be understood as a real state agreement meant to transfer of title of the property to a third party for consideration of future ownership. Trust Deeds can be used for forming charitable, religious & hospitality/rehabilitation institutes.

The whole arrangement of understanding is governed by a separate statute, i.e., the Indian Trust Act, 1882. With the above description, this article attempts to cover all the main aspects of this concept, including the objective of a deed, involved parties, power portion & mechanism behind it. After giving a brief overview, the writer ends this article with its comments.

Objective behind

All such parties are bound to follow the terms & conditions of the loan document to avoid any legal conflict. Therefore, the main objective of Trust Deed is to protect the beneficiary lender. Trust, herein can accept aid from anyone in the forms of donations or grants/contributions, etc., in cash or kind considering the objective of the specific trust deed. Funds that contradict the norms of the deed are not accepted and are considered to be inconsistent with the firm objective of the deed. Also, the trustees cannot act beyond their powers vested in them through the Trust Deed. The responsibility of handling funds is in the hands of a trustee who should act as a prudent person and get a good return from the assigned fund.

Parties Tangled

The parties to form Trust Deed can be broadly classified into three headings: beneficiary, trustees & Trustors/settlor. The beneficiaries; refer to the lenders since they are the ones whose interest is protected by the established trust. The trust deed thereby provides them reassurance against any possibility of loss. Second, the trustees are the third party or persons entitled to gain the ownership of the said property or real estate consideration on condition of complete payment of the loan amount. And last, the trustors are also referred to as the designated trustees. They can retain such designation till they meet with the terms and conditions of the promissory note. Such consistency in payments enables them to have an equitable title which further implies that they can claim equity while making loan payments.

How it Works: Mechanism

The deed mentioned above works by facilitating a lender with legal protections, enabling him to take legal action if the loan defaults at the borrower's end. Such deeds came into force, acting as alternatives to traditional mortgages. The ownership under the trust deed is guaranteed upon satisfactory repayment. Some of the crucial information recorded in Trust Deeds is the consideration for purchase, amount of money held in Trust, the force of sale of rights, and foreclosure procedures.

Power Handling

Some general or common powers are given to trusted through such deeds including the appointment of the employees, sell, dispose or alienating the trust properties, opening of bank accounts on behalf of the trust, filing of civil suits or issuing legal remedy on behalf of the trust, acceptance of gifts, donations, or contribution, investing the funds in the trust, or managing the activities and other work areas of the trust, and so on. Trustees are also obliged to maintain books of accounts of all assets, liabilities, income, and expenditure of the trust and get the accounts audited by a charted accountant.

Compliance Procedure

Considering its severity, a separate statute is made for governing all the aspects of the trust deed. From incorporation to winding-up, all are enumerated in the bare act, which couldn’t be compromised in any manner. Along with this, a trustee is responsible for maintaining regular books of accounts that are also required to be audited timely.


Ending this article, the writer wants to highlight one point: assets involved in a trust should be used consciously as it’s the main reason for raising any dispute in or against the trust deed.

Our company has a team of professionals that can help you with services related to company registration, intellectual property registration, and many more. To know more visit Quick Company.

Related Articles