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 transferee. The trustee depending upon the nature of the trust either transfers the property or its earnings to the transferee at the happening of certain events or applies the property and /or its gains for the benefit of such a transferee.
The document by which 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 Andaman and Nicobar Islands. That apart this Act is not applicable to the following:
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 majority and is of sound mind, and is not disqualified by any law. Every person domiciled in India attains majority, when he or she completes age of 18years. 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 required to play passive and role without any scope of discretion a minor may as well be appointed as trustee
However, where the trust involves exercise of discretion such as trust requiring sale of property or its investment, the trustee should be of the age of majority, of sound mind and should not be disqualified by any law.
A Corporation, a company or association 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 be made beneficiary of a trust.
An unborn person can also be made beneficiary. However, a proposed beneficiary is not bound by the desires of the person creating the trust. Such a proposed beneficiary can renounce his interest under the trust by either making a disclaimer addressed to the trustee orby setting up a claim inconsistent with the trust.
Rights Of A Beneficiary: Unless the trust instrument expresses a different intention, beneficiary 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 specifically executed to the extent of the beneficiary's interest therein. Accordingly, a beneficiary can compel the trustee 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 appointed or all the trustees die, disclaim or are discharged 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 of the trust indicates with reasonable certainty by any words or acts the following.] 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 writing signed by the author of the trust or the trustee and has to be as well registered such a trust may as well be declared by a will of the author ofthe 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 thecae 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 mere beneficial interest under a subsisting trust cannot be the subject matter of a trust.
Certain other properties also cannot form subject matter of a trust. Some of these are as follows: Chance of receiving property such as chance of a relation to obtain legacy on death of a kinsman or chance of an heir apparent to succeed to an estate. Mere right to sue. Public office or the salary of a public officer whether after or before it has became payable. An interest in property restricted in its enjoyment to the owner personally. Stipends allowed to military, naval, air force and civil pensioner's of state 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 trustee can within a reasonable period disclaim it. Such disclaimer prevents vesting of the trust property in the trustee. Disclaimer by one of two or more co-trustees vests the trust property in the other or others, and makes him or them sole trustee or trustees from the date of the creation of the trust.
However, a trustee who has accepted the trust cannot after wards renounce it except as under. With the permission of a principal civil court of original jurisdiction. Consent of the beneficiary if he is of the age of majority, and of sound mind and not disqualified by any law. 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: instrument of trust provides for it delegation is in the regular course of business the delegation is necessary the beneficiary,
being a major of some mind consents to the delegation.
Administration Of Trust Property By The Trustee: The trustee is required to fulfill the purpose of the trust and to obey the directions 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 nature 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 security. A trustee has to protect the trust property.
In the absence of a contract a trustee is not liable for the loss, destruction or deterioration of the trust roperty if in the exercise of his duties he has extended due care as a man of ordinary prudence. A trustee is required to keep clear and accurate accounts of the trust property and is also bound to furnish the beneficiaries at their request full and accurate information as 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 on issues regarding the management of the trust property if such issues can be adjudicated by the court in a short hearing. Breach Of 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 the trust property or the beneficiary has thereby sustained. However, the trustee is not liable if the beneficiary has by fraud induced the trustee to commit the breach or the beneficiary being competent to do so, has himself, without coercion or undue 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 exercised due care and diligence requisite of a man of ordinary prudence and has not facilitated or connived the breach of trust. Reimbursement Of Expenses And Over-Payment: A trustee may seek reimbursement of all the expenses properly incurred in or about execution of the trust and/or for the protection and benefit of trust property or the beneficiary. The reimbursement is to be sought from the trust property. Equally if a trustee makes an over payment to the beneficiary, he can seek reimbursement from the beneficiary's interest in trust property and if such interest is insufficient, the trustee is entitled to recover the money from the beneficiary personally. Removal Of The Trustee: The beneficiary can file suit for removal of a trustee if the trust property is not held and administered by a proper trustee. The Indian trusts Act marks out the following individuals as not proper to under take duties of a trustee- a person domiciled abroad, an alien enemy, a person having an interest in consistent with that of the beneficiary, a person in insolvent circumstances, a married woman or a minor (unless the personal law of the beneficiary such as Hindus allows a married woman or a minor).
Where the administration of the trust involves the receipt and custody of money, a beneficiary can file suit to have one more trustee if only one trustee has been appointed as per the trust instrument. Transfer Of Trust Property By The Beneficiary: The beneficiary can (where there is one beneficiary or if the several beneficiaries and all of them agree) direct the trustee to transfer the trust property to him (if there are several beneficiaries to all of them) or to such other person as the beneficiary (or the beneficiaries may desire). A beneficiary can also transfer his interest in the trust property and every person to whom a beneficiary transfers his interest acquires the rights and liabilities of the beneficiary at the date of the transfer. But such a transfer can be sought or made by the beneficiary (or the beneficiaries as the case may be) only if they are of the age of majority with sound mind and are not disqualified by any law for the time being in force in India. In case the beneficiary is a married woman and the trust property has been bequeathed to her via the trust to ensure that she would not deprive herself other beneficial interest the trust property cannot be transferred at her instance as aforesaid. Documents And Accounts Of Trust Property: The beneficiary has a right to inspect and take copies of the instrument of the trust, the documents of title relating solely to the trust property, the accounts of the trust property and the vouchers if any by which they're supported and as well the cases submitted and opinions taken by the trustee from the court for his guidance in the discharge of his duty. Protection Of Trust And Trust Property: Where a trustee has wrongfully bought trust property the beneficiary has aright to have the property retransferred by the trustee or to have such property declared subject to the conditions and safeguards of the instrument of trust. Where a third person acquires the trust property inconsistently with the trust, the beneficiary can file a suit to seek declaration that the property belongs to the trust. But such a declaration cannot be obtained if the third party has obtained the property in good faith by making due payment and without having notice of the trust However, in such cases, the beneficiary can claim the money obtained by the trustee on selling the trust property from the trustee or his legal representatives. Liability Of Beneficiary: If one of several beneficiaries facilitates or partakes in the breach of trust committed by the trustee or deceives a trustee and induces him to commit a breach of trust or fails to take proper steps to protect interests of other beneficiaries after he becomes aware of the intended or committed breach of trust, he is liable to such all other beneficiaries. These other beneficiaries can impound all the beneficial interest of such liable beneficiary until the loss caused by breach of trust is compensated. | 
Corporate-Law
