Definition:

DEFINITION AND MEANING OF TRUST : Sec 3, A trust is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner (trustee),or declared and accepted by him, for the benefit of another, or another and the actual owner.

ELEMENTS OF TRUST

1.The person who reposes or declares the confidence is called the author of trust or settler.
2.The person who accepts the confidence is called the trustee.
3.The person for whose benefit the confidence is accepted is called the beneficiary.
4.The subject-matter of trust is called the trust-property or the trust-money.
5.The object of trust should be legal.
6.There may be a instrument of trust (i.e. trust deed)
7.There may be terms and condition written in trust deed

CLASSIFICATION OF TRUST

SIMPLE TRUST – A trustee to hold estate without having any active duties to perform.
SPECIAL TRUST- The trust has been created for a particular object/purpose is a special trust.
ORAL TRUST- A trust may be declared orally.
WRITTEN TRUST- A trust may be declare on written basis or through an instrument in writing.
EXPRESS TRUST- Either orally or written ,the trust is created.
IMPLIED TRUST- The parties are not give any intention , it means intention shall not be express.
REVOCABLE TRUST- The power goes to settler or author to revoke the trust anytime.
IRREVOCABLE TRUST- It is one of that which will not come to end until the terms and conditions of trust have been fulfilled.
CONSTRUCTIVE TRUST- Imposed by law and as on equitable remedy it occurs due to some wrong doing ,where the wrong doers have achieved legal title to some properties and can not in good consent they allow to benefit from it.

Trustee – title holder of the property; has a fiduciary obligation to deal with the property to the best benefit of the beneficiary,

Trust Property – identifiable and held on trust by the trustee.

Beneficiary – person/s on whose benefit the property is held by the trustee.

Settlor/Testator – the person who sets up the trust (this person disappears once the trust is executed)

How to create a Trust ?

Trust are created when the settler of the property transfers property or provides benefit for the welfare of beneficiaries or for the usage of public purposes. For essentials conditions are necessary to bring into being a valid trust.

The person who creates a trust should make an unequivocal declaration binding on him.

He must transfer an identifiable property under irrevocable arrangement and totally divest himself of the ownership and the beneficial enjoyment of the income from the property.

 The objects of the trust must be defined and specified.

The beneficiaries are specified.

Who can Create Trust

As per Section 7 of the Indian Trust Act, a trust may be created by every person competent to contract and by or on behalf a minor, with the permission of a principal court of original jurisdiction. Following are eligible to create a Trust.

Trust by an Hindu Undivided Family.

Trust by a Minor.

Trust by a Woman.

Association of Person.

Company

Duties/Liabilities of a Trustee

The Indian Trusts Act, 1882 provides for certain duties/liabilities of a Trustee, we shall see each one of them in brief detail.

1.Execution of Trust

The trust’s stated objectives must be fulfilled by the trustee, according to the trust instrument. The trustee must also abide by the instructions given by the trust’s author at the time the trust was established. The trustee is not obligated to abide by these instructions if they are unlawful or unworkable, though.

2. Acquaintance of Trust Property

The trustee must be aware of the specifics, whereabouts, and present state of the trust property in addition to taking the necessary precautions to protect it.

3. Protection of Title of Trust Property

The trustee is obligated to refute any and all challenges to the ownership of Trust property and to take all necessary steps to assert and safeguard the title.

4. Not to set up Title adverse to the beneficiary

As the trustee is entrusted with the trust property to maintain it for the benefit of the beneficiaries, it is expected and required of the trustee to not set up any title adverse to the beneficiary. A good example explaining this point would be, suppose the trustee is entrusted with an immovable property and is required to apply the rents and profits of such property for the benefit of the beneficiaries. The trustee is also given the rights to sell such property. 

It is expected of the trustee that they would not sell such property to themselves, anyone in their family or circle of friends, or a person of a similar nature, as this would be against the interests of the beneficiaries and would negate the trust element that serves as the trust’s cornerstone.

5. Take care of the Trust Property

The trustee must provide an adequate level of protection and exercise the same caution with regard to the trust’s assets as he would with his own. The Trustee would not be liable for any damage to the trust property or any benefits that result from it, according to the Act, provided he had exercised the same caution that a normal person would exercise when handling his own property.

6.Convert perishable property

The trustee must convert, sell, and convert the trust property into cash proceeds and use those profits for the purposes of the beneficiaries if the trust property is of a type that over time will continue to deteriorate and lose value. When a trust is established for the benefit of multiple people in succession, a trustee is especially obligated to perform this responsibility.

7. Be impartial among the beneficiaries

When the trust is created for the benefit of several beneficiaries, the trustee is required to apply the benefits received from the trust property equally among the beneficiaries, without being partial to anyone or any group among the beneficiaries.

8. Protect the trust property from adverse beneficiary

If there are multiple beneficiaries to a trust and one or more of them act—or threaten to act—in a way that would be detrimental to the interests of the other beneficiaries and the trust as a whole, the trustee must take action to prevent that behavior.

9. To maintain and keep books and accounts

The trustee must always maintain a complete and accurate accounting of the trust’s assets and make it available to the beneficiary upon request.

10. Investment of Trust money

According to the Act, the trustee must invest trust funds in the ways that are specified in the Act where the trust property includes money and that money is not needed to be used immediately for the benefit of the beneficiaries. The Act covers instruments like promissory notes and other Central Government securities, in shares or debentures of the Railways or other Government corporations, in Units issued by the Unit Trust of India, etc.

Powers/Rights of a Trustee

Certain rights/powers are conferred upon the Trustee under the Indian Trusts Act, 1882. They are discussed in detail in the following paragraphs.

1. Right to Title deed

The trust deed or any other document by which the trust is established, as well as the title records of the trust property, may be kept by the trustee.

2. Right to reimburse expenses incurred for trust purposes

The trustee is entitled to reimbursement for costs he incurred in furtherance of the trust, including those incurred for the trust’s execution, the preservation of its assets, the protection or maintenance of the beneficiary, etc.

3. Right to re-collect over payment

A trustee has the power to recover any surplus funds from a beneficiary if they have unintentionally paid a beneficiary more than what was necessary. If it isn’t practicable, the beneficiary’s interest in the trust property may be used to make the collection, or if that isn’t an option, the recipient themselves.

4. Right to indemnity from breach of trust, by a gainer

If someone violated a trust and profited as a result, the trustee has the power to hold that individual accountable for their actions by seeking indemnification. However, the trustee forfeits his ability to defend himself in such a scenario if he was also involved in the fraud that resulted in the breach.

5. Right to seek Court’s opinion in managing trust property

The trustee has the right to apply to the Court, by way of a petition, to seek the Court’s opinion, advice, opinion or direction with regards to the management of the trust property.

6. Right to Settle accounts

When a trustee’s obligations have been fulfilled, the trustee is entitled to have the accounts for the administration of the trust property examined and settled. The trustee is also entitled to receive an acknowledgement when there is no longer any benefit owed to any beneficiary under the trust following the completion of the trustee’s obligations.

7. Right to sell trust property, along with power to convey

The trustee has the authority to sell the trust property in accordance with the instructions stated in the trust deed, or, in the absence of such instructions, in any manner the trustee sees fit, including by public auction or private contract.

8. Right to vary or rescind the sale of trust property, and re-sell the same

The trustee has the power to vary the conditions of the sale of trust property or even rescind such sale. He also has the power to re-sell the same property. If in such recession and re-sale, if any loss occurs, the trustee is not liable for the same.

9. Power to manage investments

Any existing investment in trust property may be sold by the trustee and replaced with any other instrument the trustee sees fit. However, if there is a beneficiary who is able to enter into contracts, the trustee cannot use this power without the beneficiary’s express written approval.

10. Power to apply property of Trust for maintenance of minor beneficiaries

The Trustee has the authority to apply, or use, the revenue from the Trust property for the support of the beneficiary if they are a minor. The upkeep of the minor may involve duties like providing food and clothing, instruction, religious observance, marriage, funerals, etc.

11. Power to compound

This authority may also be known as the authority to resolve conflicts. If there is a disagreement over any trust property, the trustees, or the sole trustee if there are two or more trustees appointed, may decide how to resolve it. For instance, they might compromise, add to the issue, give up on it, or even arbitrate it. The sole trustee or the trustees may enter into any agreement or other documents they think appropriate in the course of carrying out such settlement.

12. Trustees to continue with trust if one of several trustees dies or disclaims

The remaining trustees will have the authority to manage the trust property in accordance with the terms of the Trust Deed if there are two or more designated trustees and one of them renounces the trust or passes away.

However, such authority would not be used if the Trust Deed specifically calls for a certain number or more of trustees to carry out the trust’s authority and, following a death or disclaimer, such precise number is not met.