Q. With reference to a trust, consider the following statements:
1.A trust is not a separate legal entity, but its legal nature comes from the trustee.
2.Offshore trusts are illegal under the Indian Trusts Act, 1882.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A
Notes:
  • Statement 1 is correct: A trust is not a separate legal entity, but its legal nature comes from the ‘trustee’. At times, the ‘settlor’ appoints a ‘protector’, who has the powers to supervise the trustee, and even remove the trustee and appoint a new one.
  • Statement 2 is incorrect: The Indian Trusts Act, 1882, gives legal basis to the concept of trusts. While Indian laws do not see trusts as a legal person/ entity, they do recognise the trust as an obligation of the trustee to manage and use the assets settled in the trust for the benefit of ‘beneficiaries. India also recognizes offshore trusts i.e., trusts set up in other tax jurisdictions.

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