Trust Act in India

CREATION & FUNCTIONING OF TRUSTS

A trust is basically an arrangement made with regard to future develovement and/or use of a property by its owner. This property can be immovable such as land, houses, building structures etc., or movable such as money, shares, debentures, ornaments etc.
A trust can be distinguished from a gift or transfer of property by way of sale, mortgage, lease etc.
-When a property is gifted or is transferred by way of sale, mortgage, lease etc. It involves only two parties the owner of the property and the person or persons getting the property via such transfer called the transferee.
-However, when a property is arranged to be transferred by way of a trust apart from the owner and the transferee a third party called a trustee is also involved.
-The property in such cases is not transferred directly to the transferee but is put in control of the trustee for the benefit of the ttransferee. The trustee but is put in control of the trustee for the benefit of the trustee. The trustee depending upon the nature of the trust either transfers the perperty or its earnings to the transferee at the happeing of certain events or applies the property and/or its gains for the benefit of such a transferee.
-The document by sich a trust is created is termed as an instrument of the trust and the person for rules benefit the trust is created is termed as beneficiary.

PRIVATE TRUST
Private trusts are governed by the Indian Trusts Act, 1882. This Act is applicable to the whole of India except the State of Jammu and Kashmir and the Andmand and Nicobar Islands. That apart this Act is not applicable to the following:
a. Waqf
b. Property of a Hindu Undivided family's
c. Public or private religious as charitable endowments.
d. Trusts to distribute prizes taken in war among the captors.

CREATION OF A PRIVATE TRUST
-A Private trust may be created for any lawful purpose.
-A private trust can be created by any person who is of the age of majorityand is of sound mind, and is not disqualified by any law. Every persondomiciled in India attains majority, when he or she completes age of 18 years. But in case of a minor, for whom a guardian is appointed by the court or of whose property the superintendence has been assumed by the court of wards the age of majority is twenty one years.
-A trust can be as well created by or on behalf of a minor with the permission of a principal civil court of original jurisdiction.
-Apart from a human being, a company, firm, society or association of persons is also capable of creating a trust.

TRUSTEE/BENEFICIARY OF A PRIVATE TRUST
-Any person who is capable of holding property can be appointed a trustee.
-A person has capacity to hold property if such a person is capable of administering the property effectively and efficiently with ordinary prudence. Depending upon the nature of the trust, if trustee is reqauired to play apassive and role without any scope of discretion on a minor may as well be appointed as trustee.
-However, where the trust involves exercise of discretion such as trustrequising sale of property or its investment, the trustee should be of treage of majority, of sound mind and should not be disqualified by any law.
-A corporation, a company or associaton of persons may as well be appointed as trustee.

BENEFICIARY OF A PRIVATE TRUST
-Every person capable of holding property such as a human being, corporation, company and even a state can eb made beneficiary of at rust.
-An uborn person can also be made beneficiary.
-However, a proposed beneficiary is not bound by the desires of the personcreating the trust. Such a proposed beneficiary can renounce his interestunder the trust by either making a diclaimer addressed to the trustt orby setting up a cliam incosistent with the trust.

RIGHTS OF A BENEFICIARY
-Unless the trust instrument expresses a different intention, abenefiary has a right to the rents and profits of the trust property.
-Again, the beneficiary has the right to ensure that the intention of the author of the trust is specially executed to the extent of the beneficiary;s interest threin.
-According, a beneficiary can compel the trustte to perform any particular act of his duty or can as well restrain the trustee from committing any contemplated or probable breach of trust.
-If no trustees are appinted or all the trustees die, disclaim or aredischarged or where for any other reason the execution of a trust by the trustee becomes impracticable, the beneficiary can file a suit for the execution of the trust. In such a circumstance, the court executes the trust until a trustee is appointed for the same.
MODES OF CREATING A PRIVATE TRUST
-A trust is created when the person creating the trust, termed the author ofthe trust indicates with reasonable certainty by any words or acts the following.
a) An intention on his part to create trust.
b) The purpose of the trust.
c) The beneficiary
d) The trust property
-Again, unless the trust is declared by will, or the author of the trust is himself to be trustee, the author has to transfer the trust property to the trustee.
-A trust in relation to immovable property has to be declared in writingsigned by the author of the trust or the trustee and has to be as wellregistered such a trust may as well be declared by a will of the author of the trust or of the trustee. The will is not required to be registered.
-A trust in relation to movable property can be either declared as in the case of immovable property or by transferring ownership of the property to the trustee.

TRUST PROPERTY
-The subject matter of the trust is called trust property. Any property, which can be transferred to the beneficiary, can be subject matter of the trust. But a mre beneficial interest under a sibsisting trust cannot be the subject matter of a trust.
-Certain other properties also cannot from subject matter of a trust. Some of these are as follows:
a) Chance of receiving property such as chance of a relation to obtainlegacy on death of a kinsman or chance of an heir apparent to succeed to anestate.
b) Mere right to sue.
c) Public office or the salary of a public officer whether after or before it has became payable.
d) An interest in property restricted in its enjoyment to the ownerpersonaly.
e) Stipends allowed to military, naval, airforce and civil pensioner's ofstate or political pensions.

TRUSTEE OF A PRIVATE TRUST_ RIGHTS AND POWERS
No one is bound to accept a trust as trustee. Instead of accepting a trust, the intended tustee can within a reasonale period disclaim it. Such addisclaimer prevents vesting of the trust property in the trustee. Adisclaimer by one of two or more co-trustees from the date of the creation of the trust.
Hoever, a trustee who has aacepted the trust cannot after wards renounceit except as under.
a) With the permission of a principal civil court of original jurisdiction.
b) Consent of the beneficiary if he is of the age of majority, and of soundmind and not disqualified by any law.
c) By special power in the instrument of the trust.
Equally a trustee cannot generally delegate his duties either to aco-trustee or a stranger. A delegation of duties can be made only. If:
(A) instrument of trust provides for it
(B) delegation is in the regular course of business
(C) The delegation is necessary.
(D) The beneficiary
being a major of some mind consents to the delegation.

ADMINISTRATION OF TRUST PROPERTY BY THE TRUSTEE
-The trustee is required to fulfil the purpose of the trust and to obey the directons of the author of the trust unless they have been duly modified by the consent of all the beneficiaries.
-In order to do so, the trustee has to acquaint himself as soon as possible, with the naure and circumstances of the trust property and where necessary he is also required to transfer the trust property to himself. He may also reclaim the trust money, invested on insufficient or hazardous secuirty.
-A trustee has to protect the trust property.
-In the absence of a contract a trustee is not liable for the loss, destuction or deterioration of the trust property if in the exercise of his duties he has extended due care as a man of ordinary prudence.
-A trustee is requierd to keep clear and accurate accounts of the trust property and is also bound to furnish the beneficiaries at their request full and accurate informationas to amount and state of the trust property.
-Where the trust property consists of money and cannot be applied immediately or at an early date to the purpose of the trust the trustee is bound to invest the money on certain government securities prescribed by the Indian Trusts Act.
-A trustee can apply to the court for its opinion, advice, or direction onissues regarding the management of the trust property if such issues can be adjudicated by the court in a short hearing.

BREACH IF TRUST
-A breach of any duty imposed on a trustee is termed as breach of trust. Where the trustee commits a breach of trust, he is liable to make good the loss, which thr trust property or the beneficiary has thereby sustained.
-However, the trustee is not liable if the bebeficiary has by fraud induced the trustee to commit the breaach or the beneficiary being comepetent to do so, has himself, without coercison or undeue influence, concurred in the breach, or subsequently acquiesced therein with full knowledge of facts of the case and of his rights as against the trustee.
-Again, a trustee is not liable for the breach of trust committed by his predecessor or his co-trustee if he has himself exerciesed due care and diligence requisite of a man of ordinary prudence and has not faclitatedor connived the breach of trust.