• Setting up trust or guardian for mentally challenged

I have a family friend who is mentally challenged, he will inherent land and house from his parents.  Is there any way to set up trust or appoint someone guardian so he cannot sell land or make major financial decision without the supervision of guardian or trust?

We were thinking about setting up trust and transfer all assets to trust and have it managed by some family members.
Asked 3 months ago in Family Law from Canada
Religion: Sikh
the Local Level Committees set up under the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 can issue  guardianship certificates in regard to persons with disabilities 

2) legal guardian so appointed can open and operate the bank account and take other decisions as long as he remains the legal guardian.

3) parents  can set up a priivate trust  for the benefit of mentally retarded son and appoint some family members as trustees 
Ajay Sethi
Advocate, Mumbai
23195 Answers
1218 Consultations
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Delhi High Court
Sushma Sharma vs State Bank Of India & Ors. on 8 April, 2009
Author: S.Ravindra Bhat
14
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                                 Date of judgment: 08.04.2009.
+      W.P.(C) 5271/2008

       SUSHMA SHARMA                                                    ..... Petitioner
                               Through : Mr. Ashwin Vaish with Mr. Vinod Kumar Pandey and
                               Mr. Sanjeev Manchanda, Advocates.

                      versus

       STATE BANK OF INDIA & ORS.                                 ..... Respondents
                       Through : Mr. S.L. Gupta with Mr. Virender Singh, Advocates, for
                       Resp. No.1.
                       Mr. V.K. Tandon, Advocate with Mr. Sravan Bagaria, SDM (Hauz
                       Khas).
                       Mr. H.S. Parihar, Advocate, for Respondent No.2.
                       Mr. M.L. Khan, Advocate, for Resp. Nos. 3 and 4.

     CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT


1.     Whether the Reporters of local papers may be

       Allowed to see the judgment?

2.     To be referred to Reporter or not?

3.     Whether the judgment should be reported in

       the Digest?

S. RAVINDRA BHAT, J (OPEN COURT)

1.     Heard counsels of the parties.

2.     The petitioner seeks a direction to the respondents that she should be allowed to open

Bank Account in the name of her son with herself as guardian.

3.     The petitioner claims to be the widow of Mr. J.P. Sharma, with three children. She has a

son Mr. Kuldeep Sharma, aged 21 years. It is contended that the said Mr. Kuldeep Sharma is



W.P. 5271/2008                                                                      Page 1 of 9
 suffering from acute mental disability; a certificate issued by the Safdurjung Hospital on

10.09.2007 confirms that Mr. Kuldeep Sharma is suffering from mental retardation is 90%

disabled. A copy of the certificate is also produced along with the writ petition.

4.     The petitioner claims to have approached the State Bank of India on 01.05.2007 for

opening a joint Savings Bank Account along with Mr. Kuldeep Sharma with herself as a

guardian. She relies upon legal notice issued to the State Bank of India that was sent to the bank

on 15.02.2008.

5.     The petitioner relies upon Sections 14 and 15 of the National Trust for Welfare of

Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999

(hereafter called "Multiple Disabilities Act") and submits that persons suffering under such

disabilities are entitled to procedure for appointment for guardians. She seeks a direction to the

respondents that the provision should be honored and given effect to, so as to benefit her son.

6.     The Reserve Bank of India (RBI), which has filed its return, relies upon a circular dated

19.11.2007. The same is in the following terms:-

       "RBI/2007-2008/ 189
       DBOD.No.Leg.BC. 51 /09.07.005/2007-08
       November 19, 2007
       All Scheduled Commercial Banks
       (Excluding RRBs)

       Dear Sir,

                 Legal Guardianship Certificate issued under the National Trust
                    Act, 1999 empowering the disabled persons with autism,
                   cerebral palsy, mental retardation and multiple disabilities

       We have been advised by the National Trust for the Welfare of Persons with
       Autism, Cerebral Palsy,Mental Retardation and Multiple Disabilities (the Trust)
       that a question has been raised as to whether the banks and the banking sector
       can accept the guardianship certificates in regard to persons with disabilities
       issued by the Local Level Committees set up under the National Trust for the



W.P. 5271/2008                                                                          Page 2 of 9
       Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple
      Disabilities Act, 1999.

      2. The Trust has mentioned that the above Act was specifically passed by the
      Parliament in order to provide for appointment of legal guardians for persons
      with disability that is covered under the said Act. The above Act provides for
      appointment of legal guardians for persons with disability by the Local Level
      Committees set up under the Act. The Trust has opined that a legal guardian so
      appointed can open and operate the bank account as long as he remains the legal
      guardian.

      3. The matter has been examined in consultation with the Indian Banks'
      Association. They have concurred with the above views expressed by the Trust. It
      may also be noted that the provisions of Mental Health Act, 1987 also allows
      appointment of Guardian by District Courts.

      4. Banks are therefore advised to rely upon the Guardianship Certificate issued
      either by the District Court under Mental Health Act or by the Local Level
      Committees under the above Act for the purposes of opening / operating bank
      accounts. A list of Local Level Committees forwarded to us by the above Trust is
      enclosed.

      5. Banks may also ensure that their branches give proper guidance so that the
      parents / relatives of the disabled persons do not face any difficulties in this
      regard.

      Yours faithfully

      Sd/-
      (Prashant Saran)
      Chief General Manager-in-Charge

                        -----------------------------------
SUMMARISED LIST OF LOCAL LEVEL COMMITTEES FORMED TILL 26 FEBRUARY, 2007 At present LOCAL LEVEL COMMITTEES have been constituted in 499 districts out of the total of 591 districts in the country except J&K. State and UTS wise list are as follows: -

      STATES - 27





         Sr.              States                        Districts                Total
        No.                                                                     LLCs
                                                                                formed
        1.       ANDHRA PRADESH         EAST      GODAVARI,     KRISHNA,        23
                                        NIZAMABAD,
                                        NELLORE, SRIKAKULAM, CHITTOOR,
                                        KURNOOL, ADILABAD, WARANGAL,
                                        NALGONDA,           KARIMNAGAR,
                                        PRAKASAM,
                                        RANGAREDDY, VISAKHAPATNAM,
                                        ANANTHAPUR, MEDAK, CUDDAPAH,
                                        KHAMMAM,                GUNTUR,
                                        MAHABOOBNAGAR,
                                        VIZIANAGRAM, HYDERABAD, WEST
                                        GODAVARI
        2.       ASSAM                  KAMRUP,     NAGAON,     NALBARI,        17
                                        JORHAT,
                                        DARRANG,     CACHAR,     DHUBRI,
                                        KARIMGANJ,
                                        SONITPUR, SIVASAGAR, TINSUKIA,
                                        DIBRUGARH,            GOALPARA,
                                        HAILAKANDI, NC
                                        HILLS, GOLAGHAT, LAKHIMPUR

                                        SHEIKHPURA,             MUNGER,
                                        KISHANGANJ,
                                        LAKHISARAI,            NALANDA,
                                        MADHEPURA,
                                        ROHTAS, SHEOHAR, MAHDUBANI,
                                        SUPAUL,     BEGUSARAI,    JAMUI,
                                        SIWAN,
                                        PATNA, BHOJPUR, GOPALGANJ,
                                        VAISHALI,
                                        SAMASTIPUR,             PURNEA,
                                        BHAGALPUR,
                                        KHAGARIA
        4.       CHATTISGARH            KOREA, JANJAGIR-CHAPA, BASTAR,          16
                                        DANTEWADA,               RAIPUR,
                                        MAHASUMUND,
                                        JASHPUR,     RAIGARH,    KORBA,
                                        SURGUJA,
                                        DURG, BILASPUR, JAGDALPUR,
                                        KAWARDHA, DHAMTARI, KANKER
        5.       DELHI                  SOUTH,    SOUTH-WEST,    NORTH-         9
                                        EAST,
                                        CENTRAL, NEW DELHI, NORTH,
                                        WEST,
                                        NORTH WEST, EAST



7. The SBI submits that pursuant to the directions of RBI, it issued circulars to its various Branches on 14.12.2007; same is in the following terms:-

"Dear Sir/Madam, Account opening Empowerment of the Disabled Persons with Autism, Cerebral palsy, Mental Retardation and Multiple Disabilities Legal Guardianship Certificate issued under the National Trust Act, 1999 The Reserve Bank of India has advised that legal guardian appointed by Local Level Committee set up under the National Trust for the Welfare of the Disabled Persons with Autism, Cerebral palsy, Mental Retardation and Multiple Disabilities Act, 1999 can open and operate bank accounts on behalf of persons with disabilities as long as he remains the legal guardian. The provision of Mental Health Act, 1987 also allows appointment of Guardian by District Court.
Branches are therefore advised to rely upon the Guardianship Certificate issued either by the District Court under Mental Health Act or by the Local Level Committees under the above Act for the purposes of opening/operating bank accounts.
A copy of the RBI letter DBOD No.Leg.BC 51/09.07.005/2007-08 dated 19.11.2007 issued in this connection is enclosed.
Please ensure that branches are given proper guidance in this regard so that the persons/relatives of the disabled persons do not face any difficulties.
Yours faithfully, General Manager (Personal Banking) Enclosure:- as above."
8. This Court had, by an order dated 16.10.2008, enabled the petitioner to approach the Local Level Committee under the Multiple Disabilities Act. On 22.01.2009, the Court made the following order:-

"It was submitted by the counsel that the petitioner had moved for appointment of guardian under The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999, sometime in October. It is submitted that till date appropriate authority, the S.D.M. (Hauz Khas) has not made any order.
The appropriate authority is hereby directed to make an order having regard to the facts of the case under Section 14 of the Act, within two weeks. In case no order is made, the concerned authority shall be present in Court on the next date of hearing.
List on 17.02.2009.
Order dasti to the parties under signature of the Court Master."
9. There was some doubt as to whether the Local Level Committees indicated, have indeed been constituted and whether the petitioner had approached the concerned authority. In the circumstances, the SDM (Hauz Khas) was directed to participate in the present proceedings. He is present in Court and has filed an affidavit disclosing that Local Level Committee concerned consisted of the District Magistrate, District South, M.B. Road, Saket. It is submitted that the petitioner has preferred an application before the said Committee and that the certificate has been issued. Learned counsel for the petitioner concurs with this statement.

10. Sections 14 and 15 of the Multiple Disabilities Act are in the following terms:

14. Appointment for guardianship-
1. A parent of a person with disability or his relative may make an application to the local level committee for appointment of any person of his choice to act as a guardian of the persons with disability.
2. Any registered organization may make an application in the prescribed form to the local level committee for appointment of a guardian for a person with disability:
Provided that no such application shall be entertained by the local level committee, unless the consent of the guardian of the disabled person is also obtained.
3. While considering the applications for appointment of a guardian, the local level committee shall consider:-
(a) whether the person with disability needs a guardian;
(b) the purpose for which the guardianship is required for person with disability.
4. The local level committee shall receive, process and decide applications received under sub-section (1) and (2), in such manner as may be determined by regulations:
Provided that while making recommendation for the appointment of a guardian, the local level committee shall provide for the obligations which are to be fulfilled by the guardian.
5. The local committee shall send to the Board the particulars received by it and orders passed thereon at such interval as may be determined by regulations.
15. Duties of guardian.-
Every person appointed as a guardian of a person with disability under this Chapter shall, wherever required, either have the care of such person of disability and his property or be responsible for the maintenance of the person with disability."
11. The terms "Mental Regardation", "Multiple Disability" and "Persons with Disability" are defined in the following manner:
"(g) Mental retardation" means a condition of arrested or incomplete development of mind of a person which is specially characterized by sub- normality of intelligence;
(h) Multiple disabilities" means a combination of two or more disabilities as defined in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995;
(j) Persons with disability" means a person suffering from any of the conditions relating to autism, cerebral palsy, mental retardation or a combination of any two or more of such conditions and includes a person suffering from severe multiple disability;"
12. The Multiple Disabilities Act was brought into force for constitution of a body at the national level for welfare of persons with autism, cerebral palsy, mental retardation and multiple disabilities. A corpus of Rs.100 crores has been provided to the Trust created under the enactment to facilitate its functioning. Besides creation of various functionaries, Section 10 has spelt-out the objectives of the Trust, which are inter alia to evolve a procedure for appointment of guardians and trustees for persons with disabilities requiring such protection. The general superintendence, direction and management of the affairs and business of the Trust shall vest in a Board which may exercise all powers and do all acts and things as specified under Section 11.
13. The pleadings in this case show that the RBI initially had some reservations about the procedure adopted under the Multiple Disabilities Act and whether the certificate issued by the Local Committees could be used for the purpose of banking. The RBI discerned some conflict between the provisions of Mental Health Act, 1987 and the Multiple Disabilities Act. Eventually, as the circular of 19.11.2007 discloses, it took the view that the certificate issued under the 1999 Act could be acted upon without any further formality by the banks.

14. The submissions made by the SDM and the petitioner itself were sufficient to dispose of the proceedings. However, what this Court cannot ignore is the circumstance that it is not always possible for persons with disablities or their guardians to seek recourse to writ proceedings, as has been done in this case. This Court is also conscious of its limitations in regard to implementation of the enactment. However, at least, as regards functioning of banks, this Court is of the opinion that the RBI should issue appropriate guidelines using the powers under the Banking Regulation Act and the RBI Act and direct that all banks in India must ensure that in their Branches, essential details about the facilities under the enactment; that certificate issued under the Mental Disabilities Act are acceptable; and the fact that the parties can approach the Local Level Committees, for the purposes of issuance of the certificate etc.; along with the details of Local Level Committees (wherever applicable) in that area are displayed in a conspicuous place for the information of general public. This shall be both in the local language and English/Hindi (or both), as may be deemed appropriate in view of the demographic conditions of the area where the particular branch is located. The RBI shall evolve a suitable direction in that regard in exercise of its powers in accordance with law. A direction is also issued to the RBI to ensure that such directions are complied with and appropriately monitor their implementation.

15. Learned counsel for the SBI submits that the petitioner's request would be processed and a joint account will be opened, within two weeks from today.

16. The writ petition and the accompanying application are disposed of in the above terms.

17. Order dasti.





                                                                     S. RAVINDRA BHAT,J
      APRIL      08, 2009
      'ajk'





 
Ajay Sethi
Advocate, Mumbai
23195 Answers
1218 Consultations
5.0 on 5.0
1. A mentally ill person can be looked after by his next friend till the court appoints a guardian.
2. Once the guardian is appointed he can apply for formation of trust to take care of his properties.
3. The trust so formed can incorporate guidelines of management of trust, appointment and removal of trustees. 
Devajyoti Barman
Advocate, Kolkata
5189 Answers
54 Consultations
4.9 on 5.0
A more reliable method of providing financial security without jeopardizing government benefits is through the use of a Trust. If parents set up a Trust while still alive, they can become the trustee (the person who manages the Trust). They can also assign someone else to be trustee. A trustee can be a person or a financial institution. A private trust, created under and governed by the Indian Trusts Act of 1882, aims at managing assigned trust property for private or religious purpose. A private trust does not enjoy the privileges and tax benefits that are available to public trusts or NGOs.

Trusts are registered using a document called TRUST DEED. Prepare a Trust Deed on stamp paper of the requisite value. This document contains all the information about the Trust. Most important part of the Trust Deed that you should pay special attention to is objectives of the trust. Trust income is exempted from income tax. But to avail this facility, after registration, you need to acquire a certificate from the Income Tax Department. 

Under Indian Trust Act, a settler can create a trust with his or her own personal property, designate one or more trustees and lay down the terms and conditions benefiting the identified beneficiary(ies) including one’s own child, relative or any other individual or group of individuals. Private trust or family trust is not a Public Charitable Trusts and hence does not enjoy the privileges entitled to a trust with charitable purpose.
Ajay N S
Advocate, Ernakulam
1912 Answers
19 Consultations
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if you want to dispose off his property you can make trust. because once trust is created property will never return to the principal (maker of trust). after death of the beneficiary it shall be vested in the government.

if you want to take care of him throughout of his life and also want to save that property you should give him life interest in the property and thereafter transfer it to any other person. by doing so he will enjoy the property and any profit arising out of that property throughout of his life and thereafter it will devolve to any other person.  

you purpose will be fulfilled and also property will be in safe hand, 
Shivendra Pratap Singh
Advocate, Lucknow
2737 Answers
41 Consultations
4.9 on 5.0
Hi 

Option 1: The parents can approach the District Court to permit them to appoint a guardian for their mentally challenged son who will administer the properties after their life time. The guardian shall administer the property for the benefit of Challenged son, but need not have inherent powers to sell the property. The guardian if at all needs to sell the property will have to approach the Court for permission. 
As a next best friend of the challenged person, his well wishers can always monitor the well being and health of challenged person and can provide good support to the guardian. 

Option 2: 
Yes, the parents can set up a trust for the benefit of the challenged son.  Setting up a trust is the best option and a  preferred one  as the trust deed acts a framework and the trustees(guardians) always need to work with in the framework. 
The trust deed shall be so designed and structured to protect and maintain the interests of the beneficiary at all times. 
The articles of trust can be so incorporated that the sale of property can be done only with the permission of Court. 
 The Trust deed shall be the guiding principles(holy bible) which will outline the do and don'ts of the trust. 
Since the trust deed acts as  a holy bible and also that all trusts must have their 
a) Minutes of meetings  of trustees to be recorded and submitted to the District registrar once in 6 months and 
b) accounts audited on an annual basis by an independent auditor 

and hence both these documents are in public domain (audited accounts  and minutes of meetings are required to be submitted by the trust to District Registrar and hence open for scrutiny by well wishers, government officials ), the system itself creates appropriate checks and balances to prevent abuse. 



Requirements for setting up a Trust :

1) A private trust is usually floated when there is property involved, especially in terms of land and building. 
2) Legislation : Different states in India have different Trusts Acts in force, which govern the trusts in the state; in the absence of a Trusts Act in any particular state or territory the general principles of the Indian Trusts Act 1882 are applied.
3)Main Instrument : The main instrument of any trust is the trust deed, wherein the aims and objects and mode of management (of the trust) should be enshrined. In every trust deed, the minimum and maximum number of trustees has to be specified. The trust deed should clearly spell out the aims and objects of the trust, how the trust should be managed, how other trustees may be appointed or removed, etc. The trust deed should be signed by both the settlor/s and trustee/s in the presence of two witnesses. The trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the trust property. 
4)Trustees : A trust needs a minimum of two trustees; there is no upper limit to the number of trustees. The Board of Management comprises the trustees. 
5) Application for Registration : 
The application for registration should be made to the official having jurisdiction over the region in which the trust is sought to be registered.
6) After providing details (in the form) regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc., the applicant has to affix a court fee to the form and pay a registration fee which may range differently, depending on the location and value of the trust office and trust property. 
7) The application form should be signed by the applicant before the registrar, sub-registrar, deputy registrar, regional officer or superintendent of the regional office of the charity commissioner or authorised registrar. The application form should be submitted, together with a copy of the trust deed.
8) Two other documents which should be submitted at the time of making an application for registration are affidavit and consent letter.

Hope this helps.
Rajgopalan Sripathi
Advocate, Hyderabad
868 Answers
43 Consultations
5.0 on 5.0
1. Yes, you can forma Trust as per Indian Trust Act to look after the welfare of your mentally challenged family friend,

2. The Trust Deed should clearly mention that the scheduled properties will be used for earning rent or otherwise for the maintenance of your said friend and can not be sold during the life time of your friend or can be sold by the Trust only for the purpose of his/her welfare,

3. The Trustees should be chosen very carefully and terms for  addition of fresh Trustees after demise of present one should be clearly mentioned in the said Trust Deed which should be registered.
Krishna Kishore Ganguly
Advocate, Kolkata
12104 Answers
229 Consultations
5.0 on 5.0
A private trust can be set up to ensure smooth transfer and management of his properties. Get a flawless trust deed drafted by an Indian lawyer.
Ashish Davessar
Advocate, Jaipur
18088 Answers
448 Consultations
5.0 on 5.0
Under the given circumstances, first the mentally challenged person has to be declared the one by an order of court on a case filed by the parents of the person or any other close relatives by producing relevant medical records and if need be by examining the medical examiner who certified  his mental ill health
After that a case to be filed under guardians and wards act for appointment of a guardian either by the petitioner or a court appointed guardian..
This will ensure the protection of the interests of the mentally challenged person and safeguard his property.
T Kalaiselvan
Advocate, Vellore
13985 Answers
127 Consultations
5.0 on 5.0

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