Trust and Trust Property
Content
TRUST AND TRUST PROPERTY
Holding of property by a trustee involves various obligations and
duties on the parties to a trust deed and these are enumerated in
the Indian Trust Act 1882, which regulates the formation, and
function of the trusts, powers and duties of trusties in dealing with
trust properties.
Parties to a Trust
Trust is an obligation attached to the property thereby indicating
how the property is to be used and who are the beneficiaries of the
trust Property. It is an agreement between the Author of the Trust
and the Trustee i.e. the manager of the trust property and the owner
of the trust property. A trust may be formed by any person
competent to contract, or with the permission of the court by a
minor or on behalf of minor. A trust consists of more than one
person that is at least two persons. The person that is the owner of
the property, who reposes the confidence in another to manage the
property is called author of the Trust or a settler. The person who
manages the property as per the directions of the author of the trust
is a trustee. Both the parties, i.e. the author of the Trust, and the
trustee are parties to the document called a trust deed, which
defines the objectives and functions of the Trust. The institution is
called the Trust. Apart from the author of the Trust, and the Trustee,
the third party who is entitled to the benefits is called the
beneficiary, who is not a party to the Trust Deed. The beneficiary
has the right to insist that the trust property can be used for their
benefits although they are not a party to the said trust deed. Any
person capable of holding the property can be trustee but not the
government of India. Likewise a government servant cannot be a
trustee of mosque, temple, church or other religious institutions.
Ingredients of a Trust:
The important ingredients of a trust are – the objectives must be
certain, the beneficiaries must be certain and clear and definition of
the trust property must be clear and identifiable. The trust cannot
be created orally, must be in writing duly signed by the Author and
it can also be created by a Will. The Trusts are of many types. A
private trust, where the beneficiaries are the legal heirs of the
author, or a group of individual. A public trust is one where the
beneficiaries are whole lot of public. The trust may be partly public
and
partly
private.
A
charitable
trust
is
created for
relief,
advancement of education, religion and other purposes beneficial to
the community at large.
A trust cannot be created for the following purposes
1.
Purpose, which is forbidden by law.
2.
The purpose if permitted would defeat the provisions of law.
3.
Fraudulent purpose.
4.
Involves or implies in injury to the person, property of another.
5.
The court regards the purpose as immoral or opposed to the
public policy.
Creation of Trust:
A trust may be created only by a non-testamentary document that is
a Trust Deed. The Trust Deed is compulsorily registerable under
section 17(b) of Indian Registration Act 1908. The stamp duty
payable on Trust Deed is governed by the Indian Stamp Act 1899,
and falls under the powers of the States hence the stamp duty
varies from State to State. It is created by a deed, it is to be
registered if the value-exceeds Rs. 100. The trust act does not apply
to public or private religions endowments. Section 18 of Transfer of
Property Act 1882 relaxes all restrictions, in case of properties
transferred for benefit of public like advancement of knowledge,
religion, commerce, health and other allied objectives. A trustee
cannot delegate his duties to another, except clerical duties and
must have the final control over such delegation.
Bailment and Trust:
Often bailment and trust are confused. In bailment, there is delivery
of goods from one person to another person for some purpose and
on completion of such purpose; the goods have to be returned. In
case of Trust, the property is transferred in favour of Trustee for the
benefit of another person. In bailment, the person who received the
goods is not the legal owner, but the trustee is a legal owner of the
property.
Rights and obligations of Trustee:
The duties of the Trustee shall be well defined; he should comply
with the terms of the Trust Deed, as per the directions of the author
of the trust. He has to get acquainted with the property of the Trust
and take required care about the genuinety and recoverability of the
investments of the Trust money. The Trustee should, protect the title
of the Trust property, if necessary by instituting legal proceedings.
He should not set up any title adverse to the beneficiary. He has to
exercise proper care and be impartial and should prevent wastage
and convert any perishable property to permanent or profitable in
nature. He has to maintain proper accounts and adopt proper
investment strategies. The trustees cannot commit any breach of
trust, cannot set off the loss occurred because of breach of trust in
one portion of the trust property against profit of another portion of
trust property. When a breach of trust is committed by one trustee,
all the trustees are liable to the beneficiary for the whole loss
sustained. Like-wise, the trustee has certain rights, like possession
of the trust deed, title deeds of the trust property, reimbursement of
expenses, right to settlement of accounts, right to seek the opinion
of the court.
Maintenance of Trust Properties
The trustee may lease the Trust property for a period not exceeding
21 years without the permission of the court, may sell the property
in lots, by public auction, or by a private contract. He may also sell
under special conditions, and buy and resell. He has powers to make
the investment of the trust property, which must be in securities
listed in trust act. Any variations in investment other than listed
securities must be with the written consent of the beneficiary. He
may apply the property of the minor for maintenance of minor with
proper care and discretion. After he accepts a trust he cannot
renounce it except with the permission of the court, or with the
consent of all the beneficiaries. Trust property cannot be used for his
own benefit, and any benefit must be transferred to the trust. It is to
be noted that, the trustee cannot purchase the trust property in
respect of which he is trustee for sale. Even his agents cannot buy
the same. Further, trustee or his agent, cannot buy the beneficiaries
interest and cannot be a mortgagee, lessee of the trust property
without court permission. Similarly co-trustees cannot lend among
themselves. If trustee wrongfully sells the trust property, the
beneficiaries have a right to follow to so long it is traced
notwithstanding the intermediate ownership except in case of
bonafide sale for value without the notice of the trust.
Holding of property by a trustee involves various obligations and
duties on the parties to a trust deed and these are enumerated in
the Indian Trust Act 1882, which regulates the formation, and
function of the trusts, powers and duties of trusties in dealing with
trust properties.
Parties to a Trust
Trust is an obligation attached to the property thereby indicating
how the property is to be used and who are the beneficiaries of the
trust Property. It is an agreement between the Author of the Trust
and the Trustee i.e. the manager of the trust property and the owner
of the trust property. A trust may be formed by any person
competent to contract, or with the permission of the court by a
minor or on behalf of minor. A trust consists of more than one
person that is at least two persons. The person that is the owner of
the property, who reposes the confidence in another to manage the
property is called author of the Trust or a settler. The person who
manages the property as per the directions of the author of the trust
is a trustee. Both the parties, i.e. the author of the Trust, and the
trustee are parties to the document called a trust deed, which
defines the objectives and functions of the Trust. The institution is
called the Trust. Apart from the author of the Trust, and the Trustee,
the third party who is entitled to the benefits is called the
beneficiary, who is not a party to the Trust Deed. The beneficiary
has the right to insist that the trust property can be used for their
benefits although they are not a party to the said trust deed. Any
person capable of holding the property can be trustee but not the
government of India. Likewise a government servant cannot be a
trustee of mosque, temple, church or other religious institutions.
Ingredients of a Trust:
The important ingredients of a trust are – the objectives must be
certain, the beneficiaries must be certain and clear and definition of
the trust property must be clear and identifiable. The trust cannot
be created orally, must be in writing duly signed by the Author and
it can also be created by a Will. The Trusts are of many types. A
private trust, where the beneficiaries are the legal heirs of the
author, or a group of individual. A public trust is one where the
beneficiaries are whole lot of public. The trust may be partly public
and
partly
private.
A
charitable
trust
is
created for
relief,
advancement of education, religion and other purposes beneficial to
the community at large.
A trust cannot be created for the following purposes
1.
Purpose, which is forbidden by law.
2.
The purpose if permitted would defeat the provisions of law.
3.
Fraudulent purpose.
4.
Involves or implies in injury to the person, property of another.
5.
The court regards the purpose as immoral or opposed to the
public policy.
Creation of Trust:
A trust may be created only by a non-testamentary document that is
a Trust Deed. The Trust Deed is compulsorily registerable under
section 17(b) of Indian Registration Act 1908. The stamp duty
payable on Trust Deed is governed by the Indian Stamp Act 1899,
and falls under the powers of the States hence the stamp duty
varies from State to State. It is created by a deed, it is to be
registered if the value-exceeds Rs. 100. The trust act does not apply
to public or private religions endowments. Section 18 of Transfer of
Property Act 1882 relaxes all restrictions, in case of properties
transferred for benefit of public like advancement of knowledge,
religion, commerce, health and other allied objectives. A trustee
cannot delegate his duties to another, except clerical duties and
must have the final control over such delegation.
Bailment and Trust:
Often bailment and trust are confused. In bailment, there is delivery
of goods from one person to another person for some purpose and
on completion of such purpose; the goods have to be returned. In
case of Trust, the property is transferred in favour of Trustee for the
benefit of another person. In bailment, the person who received the
goods is not the legal owner, but the trustee is a legal owner of the
property.
Rights and obligations of Trustee:
The duties of the Trustee shall be well defined; he should comply
with the terms of the Trust Deed, as per the directions of the author
of the trust. He has to get acquainted with the property of the Trust
and take required care about the genuinety and recoverability of the
investments of the Trust money. The Trustee should, protect the title
of the Trust property, if necessary by instituting legal proceedings.
He should not set up any title adverse to the beneficiary. He has to
exercise proper care and be impartial and should prevent wastage
and convert any perishable property to permanent or profitable in
nature. He has to maintain proper accounts and adopt proper
investment strategies. The trustees cannot commit any breach of
trust, cannot set off the loss occurred because of breach of trust in
one portion of the trust property against profit of another portion of
trust property. When a breach of trust is committed by one trustee,
all the trustees are liable to the beneficiary for the whole loss
sustained. Like-wise, the trustee has certain rights, like possession
of the trust deed, title deeds of the trust property, reimbursement of
expenses, right to settlement of accounts, right to seek the opinion
of the court.
Maintenance of Trust Properties
The trustee may lease the Trust property for a period not exceeding
21 years without the permission of the court, may sell the property
in lots, by public auction, or by a private contract. He may also sell
under special conditions, and buy and resell. He has powers to make
the investment of the trust property, which must be in securities
listed in trust act. Any variations in investment other than listed
securities must be with the written consent of the beneficiary. He
may apply the property of the minor for maintenance of minor with
proper care and discretion. After he accepts a trust he cannot
renounce it except with the permission of the court, or with the
consent of all the beneficiaries. Trust property cannot be used for his
own benefit, and any benefit must be transferred to the trust. It is to
be noted that, the trustee cannot purchase the trust property in
respect of which he is trustee for sale. Even his agents cannot buy
the same. Further, trustee or his agent, cannot buy the beneficiaries
interest and cannot be a mortgagee, lessee of the trust property
without court permission. Similarly co-trustees cannot lend among
themselves. If trustee wrongfully sells the trust property, the
beneficiaries have a right to follow to so long it is traced
notwithstanding the intermediate ownership except in case of
bonafide sale for value without the notice of the trust.
