Purpose & Creation of a Trust Under Indian Trusts Act, 1882

Last Updated at: October 22, 2019

A trust (under Indian Trusts Act 1882) is a legal relationship which arises when one person hands over all or some his property to another for the benefit of a third person or himself. The person who hands over the property is known as the author, the person who receives it is known as the trustee and the person who benefits from it is known as the beneficiary. For example, a person may create a trust handing over a part of his land to a friend with the directive to provide for his old age from the proceeds of the land. A person, for example, may also create a trust by transferring to a bank certain bonds he holds and direct them to provide maintenance to his wife after his demise from the dividends received on the bonds. In India, there are basically two types of laws governing trust: 1) The Indian Trusts Act 1882 which deals with private trusts. 2) The Public Trust Act of various states which deal with public trusts. These Acts are based on the general framework of the Indian Trusts Act 1882.

Trust: Creation of a Trust

A trust can be created for myriad purposes like, for providing for the well-being of a minor, for religious or charitable purposes, for provision of medical aid to the author and so on. However, The Indian Trusts Act 1882 specifically states that a trust cannot be created for an unlawful purpose. A trust may be created by any person who is of sound mind, has attained the age of majority and is solvent. Any person capable of holding property may be appointed as a trustee. A person is not bound to accept responsibility as a trustee. He must declare his intention by words or actions. It is the duty of the trustee to fulfill the purpose of the trust.Any person who is capable of holding property may be a beneficiary of a trust.A trust may be created of a movable property or an immovable property. In case, of immovable property it is necessary that the “trust instrument” be signed by the author or trustee and be registered unless the trust is created in the will of the author or trustee.A trust of movable property may be created in the above-mentioned manner by the execution of an instrument or by the transfer of ownership of the property to the trustee.

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Trust: How Created

Certain essentials for the creation of a trust are: 1. Express declaration by the author 2. The intention to create a trust 3. Purpose of the trust 4. Name of the trustee 5. Trust property 6. The beneficiaries 7. Transfer of trust property to trustees

Ending a Trust

A trust gets extinguished in the following cases: 1. Purpose is fulfilled 2. Purpose becomes unlawful 3. Fulfillment of purpose becomes impossible, for example by the destruction of trust property. 4. Trust is revoked, if it is revocable. 5. The purpose of a trust may be modified by the consent of all beneficiaries competent to contract.

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