The instrument by which the trust is declared is called instrument of Trust, and is generally known as Trust Deed.
It is well settled that no formal document is necessary to create a Trust as held in Radha Soami Satsung vs. CIT- (1992) 193 ITR 321 (SC). But for many practical purposes a written instrument becomes necessary under following cases –
When the trust is created by a will irrespective of whether the trust is public or private or it relates to movable or immovable property. This is because as per Indian Succession Act, a will has to be in writing
2. When the trust is created in relation to an immovable property of the value of Rs.100 and upwards, in case of a private trust. In case of public trusts, a written trust deed is not mandatory, even in respect of immovable property, but is optional.
3. Where the trust/association is being formed as a society or company, the instrument of trust; i.e., the memorandum of association, and Rules and Regulations has to be in writing.
A written trust-deed is always desirable, even if not required statutorily, due to following benefits :
d. a written trust deed is a prima facie evidence of existence of a trust ;
e. it facilitates devolution of trust property to the trust;
f. it clearly specifies the trust-objectives which enables one to ascertain whether the trust is charitable or otherwise;
g. it is essential for registration of conveyance of immovable property in name of the Trust;
h. it is essential for obtaining registration under the Income-tax Act and claiming exemption from tax;
i. it helps to control, regulate and manage the working and operations of the trust;
j. it lays down the procedure for appointment and removal of the trustee(s), his/their powers, rights and duties; and
k. it prescribes the course of action to be followed under any eventuality including dissolution of the trust.