Can an NRI be the sole trustee of an Indian private trust?

Can my NRI son be appointed as trustee of my Indian private family trust, and can he be the sole trustee?- Name withheld on request

There is no express prohibition under the Indian Trusts Act, 1882, on appointing a non-resident Indian as a trustee of an Indian private trust. However, the appointment should be structured carefully, in the context of the rights available to beneficiaries under the Indian Trusts Act, 1882.

Section 60 of the Act gives beneficiaries the right to have the trust property protected, safeguarded and administered by “proper persons”. The provision indicates that persons residing permanently outside India or domiciled abroad may ordinarily not be regarded as proper persons for this purpose.

That position, however, is subject to the terms of the trust instrument. Accordingly, where an NRI family member is intended to act as trustee, the trust deed should expressly contemplate the appointment and continuation of a trustee residing outside India. It is also advisable for the beneficiaries to acknowledge and accept this arrangement, preferably through the trust deed itself.

Foreign-exchange implications should also be considered, since legal ownership of trust assets vests in the trustees and the regulatory position may vary depending on the nature of the assets held by the trust.

There is also a succession and continuity consideration under Section 73 of the Indian Trusts Act. The provision permits the appointment of a new trustee in certain circumstances, including when an existing trustee remains continuously outside India for six months or leaves India to reside abroad.

In closely held family trusts, such provisions may rarely become contentious while relationships remain harmonious. However, they can assume greater significance if disputes subsequently arise between trustees and beneficiaries. A carefully drafted trust deed should therefore address, with precision, the appointment, powers, continuation, removal and replacement of a non-resident trustee.

The number of trustees should be considered as part of the same governance framework. Explanation II to Section 60 ordinarily contemplates at least two trustees where the administration of the trust involves the receipt and custody of money, although this requirement is also subject to the terms of the trust instrument. Accordingly, where the trust deed expressly permits a sole trustee, a single-trustee structure may be possible.

From a practical and continuity perspective, however, appointing two trustees is generally the more robust arrangement, particularly where one trustee is an NRI. Having at least one trustee resident in India can simplify administration and procedural compliance, such as banking and execution of documents, while also providing greater continuity if the non-resident trustee is unavailable or ceases to act.

Rohit Jain is the managing partner, and Keshav Singhania is the head of private client at Singhania & Co.

Catch all the Instant Personal Loan , Business Loan , Business News , Money news , Breaking News Events and Latest News Updates on Live Mint.