– Name withheld on request
As a 60-year-old Muslim man looking to set up a trust for your daughter and her family, it’s wise to consider the specific legal aspects of Muslim law. The way a trust is established—either during your lifetime or through a Will—significantly impacts its validity.
Lifetime Trust (Inter Vivos)
You can create a trust and transfer assets to it while you are alive. This is similar to a gift under Muslim law and is generally permitted by courts. To create a lifetime trust, you should:
Identify Trustees: Choose one or more individuals to manage the trust’s assets.
Execute the Trust Deed: Create a legal document with the trustees, paying the required stamp duty.
Register the Deed: If the trust includes immovable property (like real estate), you must register the deed.
Transfer Assets: Officially move the assets you want to include into the trust, which the trustees must accept.
Your daughter and her family can be named as the beneficiaries in this trust deed.
Testamentary Trust (Created via a Will)
This is where Muslim law has specific rules. Under Islamic law, you cannot bequeath more than one-third of your total estate through a Will without the consent of your legal heirs. This rule applies in several situations:
Creating a trust directly in your Will.
Creating a lifetime trust but funding it with assets from your Will.
Creating a lifetime trust but retaining control over the assets so that the beneficiaries only gain access after your death. This makes the trust function like a Will.
Transferring assets to a trust “in contemplation of death.”
In all these cases, if the value of the assets you are contributing to the trust exceeds one-third of your total estate, you must get your heirs’ formal consent.
Additional considerations for heirs
Under Sunni law, a bequest to an heir (even if it’s within the one-third limit) is not valid unless the other legal heirs agree to it. While legal precedent on this is limited, it is a best practice to get the formal consent of all your heirs for any property you contribute to the trust, especially since your daughter and her family are your legal heirs.
Regardless of whether you choose a lifetime or testamentary trust, the terms of the trust deed will be primarily governed by the Indian Trusts Act, 1882, and other Indian trust laws.
Given these nuances, it is highly recommended that you consult a legal advisor. They can provide guidance on both trust law and Muslim law, ensuring your documentation is robust and tailored to your specific needs.
Shaishavi Kadakia is a partner and Sachi Shah is a senior associate at Cyril Amarchand Mangaldas, Mumbai.
