Archive / Investment Adviser (Level 2) / Tools for Estate Planning
nism-series-xb-trust-estate-planning-tool-definition[ INVESTMENT ADVISER (LEVEL 2) ]
Which estate planning tool allows an individual (the settlor) to transfer assets for management by a designated party, to be held and administered for the benefit of specified beneficiaries, governed in India by the Indian Trusts Act, 1882?
[ A ]A Trust[ CORRECT ]
[ B ]A Will
[ C ]A Power of Attorney
[ D ]A Gift Deed
Takeaway
Option A is correct: a Trust.
Derivation
A Trust is a legal arrangement, governed in India by the Indian Trusts Act, 1882, in which a settlor transfers assets to a trustee, who holds and manages those assets for the benefit of designated beneficiaries according to the terms set out in the trust deed. This distinguishes a Trust from a Will (which only operates after death, under succession law), a Power of Attorney (which merely authorizes an agent to act on the principal's behalf), and a Gift Deed (which transfers full, immediate, unconditional ownership rather than ongoing managed benefit).
Why the others fail
B — A Will
A Will only takes legal effect on the testator's death and is governed by succession law, not the Indian Trusts Act, 1882, and does not involve a third party holding assets for beneficiaries during the settlor's lifetime.
C — A Power of Attorney
A Power of Attorney authorizes an agent to act on the principal's behalf in specific matters — it does not create a separate legal arrangement for holding and managing assets for beneficiaries.
D — A Gift Deed
A Gift Deed transfers ownership of an asset outright and immediately to the recipient — it does not establish an ongoing management arrangement for the benefit of designated beneficiaries.