Difference Between Private and Public Trust

Edited by Diffzy | Updated on: September 24, 2022


Difference Between Private and Public Trust Difference Between Private and Public Trust

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A trust is a legal document that is used to manage assets on behalf of another person or entity. Trusts may be divided into two categories: private and public. Depending on the trust, there are varied laws and repercussions in terms of who has access to assets and how they're utilized, who the beneficiaries are, and how the funds are placed in trust.

Private trusts and public trusts are the two kinds of trusts that exist in India, respectively. Private trusts are controlled by the Indian Trusts Act of 1882, which was passed in 1882. Charitable trusts and religious trusts are the two types of public trusts that exist in India. The Charitable and Religious Trust Act, 1920, the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890, the Maharashtra Public Trust Act, 1950, and the Maharashtra Public Trust Act, 1950, among others, govern the establishment and administration of public trusts in India. Government-owned public trusts in Maharashtra are managed under the Maharashtra Public Trusts Act, 1950, which was enacted in 1950. ("MPTA")

Private Trust vs Public Trust

The main difference between a private trust and a public trust is that a private trust has a single beneficiary or is restricted in scope. On the other hand, the beneficiaries of the public trust include a large number of individuals or members of the general public. Because of this, investment in private trusts is restricted to certain persons, but investment in public trusts has a more ambiguous allocation of risk.

There are several distinctions between a Public Trust and a Private Trust, but the most important distinction is that the Public Trust is established for the benefit of the general public, while the private trust is established for the benefit of a single beneficiary or beneficiaries. As a result, the fundamental distinction between the two trusts is that the interest in the Public Trust is vested in an uncertain and fluctuating entity, while the beneficiaries of the Private Trust are definite and ascertained people. In the case of a Public Trust, the benefit endowments vest in an uncertain and fluctuating group of people, either the whole public or a significant fraction of the public trusts, but in the case of a Private Trust, the beneficial endowments vest indefinite and ascertained individuals. Public trust is administered by a board of trustees, but a private trust is handled either by the managing trustee or by a small number of nominated trustees, depending on the circumstances.

Differences Between Private and Public Trust in Tabular Form

Table: Private Trust vs Public Trust
Parameters of Comparison
Private Trust
Public Trust
Private trusts often have a predetermined group of beneficiaries, or they may be controlled by a single person or organization.
Public trusts are open networks with a greater number of beneficiaries than private trusts.
Typically, a single person or group is designated as trustee, and this individual or group is specified.
There are a lot of trustees who work for the public good.
Private trusts may be divided into three types: irrevocable trusts, determinate trusts, and discretionary trusts.
Public trusts are often divided into two categories: charitable and religious.
To query or probe private trusts, authorization must first be obtained from the trust's trustee.
Because information is shared openly among members of public trusts, they are accessible to anybody who wishes to view them.
Private trusts are often established to benefit a single person or group of people.
Public trusts are often established to serve the broader public's interests.

What is a Private Trust?

A Private Trust is governed by the Indian Trust Act of 1882. A private trust is a vehicle through which property may be transferred from one person (owner) to another for the benefit of an individual or an ascertainable group of persons, without the involvement of the government. The Settler or Author of the trust is the person who creates the trust and determines the trustee, beneficiaries, as well as the property that will be transferred, and the rules that will govern the rights and duties of the trustee.

This person is also known as the trust's creator or creator of the trust. This is referred to as the trustee relationship, and the beneficiary relationship refers to whom the trust is formed for the benefit of the trustee. Take, for example, the case where "A" establishes a private trust and transfers some property to "B," ordering him to utilize such trust property at the time of "C's marriage." A trust that has been established may be either revocable or irrevocable, depending on the purpose for which it was established.

A private trust company, often known as a family trust business, is a kind of estate planning vehicle that may be used to protect and distribute assets. High-net-worth and ultra-high-net-worth persons are the most common beneficiaries of this form of trust organization. For example, someone who owns a family-owned firm and has assets worth $150 million may decide to form a private trust corporation rather than a revocable living trust to protect his or her assets. A private or family trust corporation may provide some advantages for estate planning purposes, but it is vital to understand the legal ramifications and expenses of establishing one.

To act as the trustee for one or more family trusts, a private trust corporation is formed. State rules normally require that the trust be managed by a fiduciary who has a valid license to do so. Trustees are appointed by the trust company's board of directors, which may or may not include members of the family that founded the trust business. Members of the family can also serve on a variety of committees that are involved in the administration and management of the company.

A trust may be revoked or dissolved for any of the reasons listed above by either the Settler or the beneficiary, or by a court of law. However, it is important to remember that when a Private Trust is dissolved, a 'Trust Dissolution Deed' must be entered into by the parties and must be officially recorded.

What is Public Trust?

The term "public trust" refers to an express or constructive trust established for either public, religious, charitable, or both purposes, and includes any temple, math, wakf, church, synagogue, agiary, or another place of public religious worship, dharmakaya, or another religious or charitable endowment, as well as any society established for either a religious or charitable purpose or both and registered under the Societies Registration Act, 1860. There is no centralized legislation that governs public trusts; instead, several states have adopted distinct acts that are tailored to their specific situations and administrative requirements.

In the United States, public trust is a vehicle established for the specific benevolent purpose of the author to provide for a specific purpose or object for the benefit and need of the beneficiaries, who may or may not be specifically defined in the trust deed but may include a broad genus of people who fall within the parameters of the trust's object and purpose. As public trusts are intended to benefit an undefined majority of people, there should be more regulations, checks, and balances in place for their operation, governance, and maintenance. The management of such trusts should not be left unchecked to prevent the purpose for which the trust was established from being vitiated or destroyed.

The trustees, management, and purpose of a public trust are all available for inspection and questions, and because they are in the public domain, special care should be taken to ensure that the transparency, effectiveness, and utility of such trusts are not diminished and that they continue to serve the beneficiaries for whom they were established.

There is no centralized legislation that governs public trusts; instead, several states have adopted distinct acts that are tailored to their specific situations and administrative requirements. To establish a public trust, the only thing that is required is a draft trust deed that names the trustees, states the trust's aims, and names the intended beneficiaries, who must be members of the general public. This is followed by registration of the public trust according to the State Trusts Act, making the trust eligible for tax refunds under the terms of the Income Tax Act. The religious endowments and trusts known as Wakfs are variations on the public trust concept.

Main Differences Between Private and Public Trust In Points

  • Information provided inside the public trust may be accessed by anybody who wishes to do so. When it comes to private trusts, the information included inside them is only viewable to individuals who are also members of that trust.
  • Private trusts are often smaller in size and are used for investing in short-term loans, while public trusts are normally bigger and are used for real estate investment.
  • A private trust consists of a trustee who is responsible for the management of the trust's assets on behalf of one or more beneficiaries. A public trust performs the same functions as a private trust, but for a broader group of beneficiaries.
  • In the case of private trusts, they are those that solely benefit one or a few persons. In the case of public trust, there are several beneficiaries of the trust.
  • An important distinction exists between the purpose of a private trust, which is for the benefit of a specific group of people or individuals (such as a spouse, children, relatives, or other beneficiaries), and the purpose of a public trust, which is for the benefit of people who are unknown to the settlor and who need assistance (such as the settlor's neighbors).
  • The fundamental distinction between the two trusts is that the interest in the former is placed in an indeterminate and fluctuating entity, whilst the interest in the latter is vested indefinite and ascertained persons.
  • In the case of private trusts, there are three divisions, while public trusts are separated into two divisions.
  • In contrast to private trusts, which are generally created to benefit a single individual or group of individuals, public trusts are often founded to serve and protect the interests of the general public.


Trusts are now widely used in most financial and legal systems, and they are recognized by the Hague Convention on the International Organization of Trusts. Non-residents and private discretionary trusts have also been excused from the need to file their income tax returns online, according to the government.

Trust is a notion that revolves around the author, the trustee, and the beneficiary or beneficiaries, with rights and duties being allocated to each of them in the process of creating the trust. Numerous benefits of trusts include the protection of money and assets from creditors, the reduction of tax liability, the well-being of family members, assistance with property succession, and many more. If a trust is established by all applicable legal requirements, each of the trust's organs will benefit from the trust's creation.

In business, a trust is a legal entity that is created to hold a property for the benefit of one or more beneficiaries, and it is sometimes referred to as a "trustee." A trust is a fiduciary relationship in which the trustee is the legal owner of the property or assets that are held by the trust in question. The trustee is in charge of running the trust and making use of the trust's property or assets for the benefit of the beneficiaries, who are also referred to as cestui que trust (trust beneficiaries).

There are significant variations between private and public trusts, even though both are trusts in the traditional sense. The most significant contrast between public and private trusts is how assets from an estate are kept and transferred from one to the other. It is critical to understand the difference between the two before making a decision on which to invest in.



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"Difference Between Private and Public Trust." Diffzy.com, 2023. Mon. 20 Mar. 2023. <https://www.diffzy.com/article/difference-between-private-and-public-trust-362>.

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