The demand for trusteeship services is increasing in India. As the nouveau rich fear their offsprings squandering the accumulated wealth, many have started asking their private bankers to set up discretionary trusts to preserve the wealth from reckless heirs.

"Considering the amount of wealth being created in the country by first generation entrepreneurs, we are beginning to see them demanding setting up of trusts to protect their wealth against the second generation filtering it away," says Vijay Venkatram, manager, financial planning services, HSBC.

Fruits of the corpus under the trusteeship of banks will be made available to next generation in bits and pieces as decided by the owner after his demise, he adds.

The world of private banking in India is evolving, with banks and large brokerage houses targeting the crème de la creme of society who have surplus wealth anywhere in excess of Rs 10 lakh (Rs 1 million) to Rs 2 crore (Rs 20 million), says Dipak Gupta, executive director, Kotak Mahindra Bank.

Clients availing of private banking services in the country use it primarily for managing their wealth. Today, increasing number of clients are demanding more as they see the need to preserve their wealth for generations to come.

The second generation seemingly having had it easy are seen to be squandering the family wealth, especially in light of the changing lifestyle.

"A handful of clients are going for trusteeship services," said HDFC Bank country head -- equity and private banking group -- Abhay Aima. There are a number of private trusts set up by Jains on account of tax purposes.

Similarly, charitable trusts are set up to take advantage of tax exemptions available. However, enquiries are now coming in from individuals who wish to secure their wealth for future generations.

A similar exercise takes place in the West, where trusts are set up to ensure against sizeable amount of wealth being wiped off to pay estate dues and other government taxes in the event of death of the owner.

In many European countries, inheritance tax can take away 30-40 per cent of one's wealth. In India, however, there is no inheritance tax and gift tax has since been abolished.

A trust is a legal relationship and not a legal entity, which is created to shift the burden of property ownership onto the trustee (in many cases, a bank), while retaining the benefit of the property for oneself or one's family.

Trusts can last for several generations. Laws are passed in many countries providing trusts to last for a maximum period of time. In England, it is 80 years, while in Bermuda and Jersey it is 100 years.

"Trusts do not die and therefore while the next generation cannot get full ownership of assets, they can enjoy the fruits as directed by the originator of the trust," Venkatram said.