Overview of a Declaration of Trust

What is the Declaration of Trust?

A Declaration of Trust is an instrument by which a shareholder declares that he/she is holding the share on behalf of another person/entity.

A Declaration of Trust is executed as a deed by the shareholder under whose name the shares are registered, who is referred to as the “nominee”. The person/entity on behalf of whom the shares are held is referred to as the “beneficial owner”.

A Beneficial owner has the privilege of remaining anonymous whereas a Nominee name is written in all the records. A nominee has to sign a Deed of Trust which states that they won’t get any benefit from the shares in the future and are not the legal owner of the shares.

Is a Declaration of Trust legally binding?

A Declaration of Trust is a written statement to appoint a trustee on certain terms and conditions. It is a legally binding document that records the predetermined conditions between joint owners. It is also known as “Deed of Trust”.

How does a Declaration of Trust work?

It basically consists of two parties, trustee and beneficial owner. A trustee lets you use their name to act as the registered owner of the assets or shares but in reality, they only hold the assets/shares for your benefit. So, it will give you a legal advantage in case of any dispute in the future.

Conclusion

A Declaration of Trust is an important instrument that can be used for buying shares by creating a nominee shareholder or it can even be used for buying the property with joint owners.

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