According to legal experts at Singhania & Co, there is no express prohibition under the Indian Trusts Act, 1882, on appointing a non-resident Indian as a trustee of an Indian private trust. However, the appointment should be structured carefully, considering the rights available to beneficiaries under the Act. Section 60 of the Act gives beneficiaries the right to have the trust property protected, safeguarded and administered by 'proper persons', with persons residing permanently outside India or domiciled abroad may ordinarily not be regarded as proper persons for this purpose.
As reported by Singhania & Co, the position under Section 60 is subject to the terms of the trust instrument. Accordingly, where an NRI family member is intended to act as trustee, the trust deed should expressly contemplate the appointment and continuation of a trustee residing outside India. It is also advisable for beneficiaries to acknowledge and accept this arrangement, preferably through the trust deed itself. Foreign-exchange implications should also be considered, since legal ownership of trust assets vests in the trustees and the regulatory position may vary depending on the nature of the assets held by the trust.
According to legal experts, there is a succession and continuity consideration under Section 73 of the Indian Trusts Act that permits the appointment of a new trustee in certain circumstances, including when an existing trustee remains continuously outside India for six months or leaves India to reside abroad. In closely held family trusts, such provisions may rarely become contentious while relationships remain harmonious. However, they can assume greater significance if disputes subsequently arise between trustees and beneficiaries. A carefully drafted trust deed should address the appointment, powers, continuation, removal and replacement of a non-resident trustee with precision.
As reported by Singhania & Co, Explanation II to Section 60 ordinarily contemplates at least two trustees where the administration of the trust involves the receipt and custody of money, although this requirement is also subject to the terms of the trust instrument. Accordingly, where the trust deed expressly permits a sole trustee, a single-trustee structure may be possible. However, from a practical and continuity perspective, appointing two trustees is generally the more robust arrangement, particularly where one trustee is an NRI. Having at least one trustee resident in India can simplify administration and procedural compliance, such as banking and execution of documents, while also providing greater continuity if the non-resident trustee is unavailable or ceases to act.
