Law of Trusts

KJA 14 December 2011
R. Muralidhran
Regd Off:- Advocate, Patent Agent
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Law Lecturer,Mediator
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FORT,
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mailto:[email protected]
Offices at: Pune, Ahmedabad and New Delhi

1
LAW OF TRUSTS
INTRODUCTION
 The concept of Trust, in the present way (as we
understand it) was not known to ancient Hindu
System. Trust owe their origin to Roman Law and
for British Lawyers, Trust is the “Daughter of Use
 A Trust is an obligation annexed to the
ownership of a property and it arises out of the
confidence reposed in the trustee which the
trustee undertakes to discharge.
 Whereby the trustee commits to administer the
property for the benefit of another who can be
the owner.
ESSENTIAL FEATURES OF TRUST
For a trust to come into existence, the following

criteria must be fulfilled:
 There must be an author of the Trust
 The author must commit a property for the

purposes of the Trust
 He must have an intention to create a Trust.
 The purpose of the trust must be identified.

ESSENTIAL FEATURES OF TRUST CONTD..
 The Trustee who will administer the property

should be identified (a trustee may also be the
author)
 The Beneficiaries must be identified.
Thus there are three parties to the trust- Author,

Trustee and Beneficiary.
ESSENTIAL FEATURES OF TRUST CONTD..
 Under the Law, the Trustee is the legal owner of
the Trust Property. But the Beneficiaries have an
equitable interest in the administration of Trust
Properties.
 However this equitable interest of the Beneficiary
will not entitle them to interfere with the Trustee’s
power to administrate the Trust Property so long as
he exercises due care and diligence
 The acceptance of the Trustees is essential and
must be specific and explicit
QUASI TRUST OBLIGATIONS
 Under common law and by Statutes, obligations

which are similar to the Trust’s Obligations are
known as Quasi Trust Obligations, arising in
fiduciary capacity.
CLASSIFICATION
Broadly Trusts are classified based on the nature

of Beneficiary into:
 Public Trust
 Private Trust
PUBLIC TRUSTS
 When the Beneficiaries are uncertainable class

of people, or
 Causes which will incidentally benefit a group
of Humans
 It is called Public Trusts
PRIVATE TRUST
 When the Beneficiaries are clearly identified

Human Beings, whether in existence or not,
then the Trust is called a Private Trust
 The Indian Trusts Act passed in 1882 (effective
from 13th Jan 1882) seeks to govern only
private Trusts.
BREACH OF TRUST
 The phrase Breach of Trust under Trust Law, is

totally different from the phrase Criminal
BREACH of Trust in Indian Penal Code.
TRUST V. OTHER MODES
 Trust should be distinguished from agency,

bailment, gift and execution of the estate of a
deceased .
 To put it simply, Trust is an equitable interest
right, title in a property, distinct from the legal
ownership thereof.
CREATION OF TRUST
 As per S.6 of the Indian Trusts Act, a trust deed

is not necessary to create a valid trust sO long
as the creation of the trust is indicated with
reasonable certainty by words and acts.
BENEFICIARY
 Beneficiary is a person capable of holding

property and need not be competent to
contract.
 A beneficiary can relinquish his equitable
interest in the Trust Property.
CAN MINOR BE A TRUSTEE?
 Under S.10 of the Act, though a minor can be a

trustee, if the job involved exercise of
discretion, he cannot execute unless he is
competent to contract.
 In such a case, either a natural guardian or a
Court appointed friend will administer the Trust.
ACCEPTANCE AND DISCLAIM OF TRUST
 A trust is accepted by words and acts of the

trustee
 No one is bound to accept a trust
 Instead of accepting a trust, the trustee may,

disclaim it within a reasonable period of time.
OBLIGATIONS OF THE TRUSTEE
 He must obey the directions of the authors of

the Trust regarding the administration but at a
later time, with the consent of the Beneficiary,
he can modify the directions.
 He should inform himself of the Trust Property
 He should protect the title of the Property
 He must exercise due care and deligence.

OBLIGATIONS OF THE TRUSTEE
 He must be impartial and prevent waste

 He is not allowed to set off the Trust Funds to a
claim owed by the Trust to the Trustee.
 He is not responsible for the Co-Trustee’s
default.
 The Liability of the Co-trustee is not joint but
severed.
RIGHTS AND POWERS OF TRUSTEE
 Right to possess trust property and hold its

documents of title
 Right to reimbursement of expenses
 Right of indemnity and seek Court’s opinion on

the administration of Trust.
RIGHTS AND POWERS OF TRUSTEE
 Subject to the powers given under the terms of

the trust and the applicable law, the trustee
has the general right to sell the Trust property
in ways he considers appropriate and
reasonable.
 Right to vary investments and give receipts o
behalf of the Trust.
DISABILITIES OF THE TRUSTEES
 Trustee cannot renounce after acceptance,
except after Court’s Order.
 He cannot delegate trusteeship, except when
the Trust Deed so provides or when the
Beneficiary consents to it.
 Co-trustees cannot act individually.
 The Trustee should exercise discretionary
powers reasonably and good faith and the
same can be controlled by Civil Courts.
DISABILITIES OF THE TRUSTEES
 He cannot charge for service, except as

provided in the Trust Deed
 He may not use the Trust Property for his own
benefit
 He should not buy the Beneficiaries property
without the Court’s permission.
 Co-trustees may not lend between themselves.
BENEFICIARIES RIGHTS
 Right to receive rent and profit

 Right to specific execution and to compel any
act or duty.
 Right to inspect and take copies of Trust Deed,
resolutions, accounts etc.
BENEFICIARIES RIGHTS
 Subject to the provisions of the Trust Deed and

the applicable law, Beneficiary has the right to
transfer his interest.
 Right to sue for execution of the Trust
 Right to Proper Trustees

EXTINGUISHMENT OF TRUST
A Trust Comes to an end when
 Its purpose is fulfilled
 Its purpose becomes unlawful
 Its purpose cannot be fulfilled
 If it is a revocable trust and is thus revoked.
 By completion of duties of the Trust
 By means prescribed in the Trust Document.
 By appointment of new Trustees.
REMOVAL OF TRUSTEES
A Trustee may be removed when

 He is wanting in honesty
 Lacks reasonable capacity to administer the

Trust
 Proven Infidelity to Trust Obligations
 By consent of Beneficiaries
 By order of a Court.
KJA 14 December 2011
Acknowledgements..
• Adhunika PremKumar (2014 Batch, Christ University)
27
THANK YOU FOR
A PATIENT HEARING

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KJA 14 December 2011

Offices at: Pune, Ahmedabad and New Delhi

For a trust to come into existence, the following

 The author must commit a property for the

 The purpose of the trust must be identified.

 The Trustee who will administer the property

Thus there are three parties to the trust- Author,

 Under common law and by Statutes, obligations

Broadly Trusts are classified based on the nature

 When the Beneficiaries are uncertainable class

 When the Beneficiaries are clearly identified

 The phrase Breach of Trust under Trust Law, is

 Trust should be distinguished from agency,

 As per S.6 of the Indian Trusts Act, a trust deed

 Beneficiary is a person capable of holding

 Under S.10 of the Act, though a minor can be a

 A trust is accepted by words and acts of the

 Instead of accepting a trust, the trustee may,

 He must obey the directions of the authors of

 He should protect the title of the Property

 He must exercise due care and deligence.

 He must be impartial and prevent waste

 Right to possess trust property and hold its

 Right of indemnity and seek Court’s opinion on

 Subject to the powers given under the terms of

 He cannot charge for service, except as

 Right to receive rent and profit

 Subject to the provisions of the Trust Deed and

 Right to Proper Trustees

A Trustee may be removed when

 Lacks reasonable capacity to administer the

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