A brief history of trust law

Trust law has a lengthy history, stretching back to ancient civilizations until taking on its current
form in medieval England. Rome and Greece had notions comparable to trusts, but not identical.
Due to common law limits, modern trust was created. Courts of chancery established use to
separate legal ownership from who really benefits (beneficiary). Trust law evolved into equity a
legal system centered on fairness that lived with tougher common law. The notion of trusts has
evolved to embrace a wide range of assets and purposes, with some trusts even becoming
overseas.

 Trust is the love child of equity.

Different type of trust

According to the nature of the duties of the trustees

1: simple trust

 A simple trust makes no payment other than current income. The trust's rules require that
all its revenue go to charity immediately and provide nothing for charitable donations.

2: special trust

 A special trust is a legal system for controlling money for a specified purpose. It can be
used to support people with disabilities or to save money for young children until they
reach adulthood.

According to their objects

1: private trust

 A private trust allows you to delegate control of your assets (money, property) to someone
(trustee) who will benefit someone else (beneficiary) as you choose.

2: public or charitable trust

  Public trusts, often known as charitable trusts, are like private trusts but are used for charity
purposes. Instead of helping a single individual, they benefit a a large number. Such as
education or animal welfare. There’s more government oversight and potential tax breaks
for donations.

According to their mood of creation

1: express or declared trusts

 A trust clearly expressed by author.

2: implied or presumed trusts

 not clearly expressed by author

3: constructive trusts

According to their mode of creation

4: resulting trusts.

 Resulting trusts are created by law to prevent people from suddenly owning property they
shouldn't.
5: precatory trusts

 Precatory trusts use hopeful wishes, not clear instructions, so a legal trust may or may not
be created.

6: secret trusts

 Secret trusts conceal a beneficiary's identity inside a will by depending on evidence of the
testator's hidden instructions.
Different definition of trust
The trusts act, 1882 section 3.

Trust is a legal duty that comes with the ownership of property. It occurs when someone (the
author) transfers ownership to another person (the trustee) with a promise that they would keep it
for the benefit of a third party (the beneficiary).

The trustee has a duty to manage the property according to the terms of the trust, and any
violation of this duty is considered a breach of trust.

 The person who creates the trust is called the "author of the trust".
 The property that is held in trust is called “trust property" or "trust money".
 The beneficiary's interest in the trust is called the "beneficial interest".
 The document that creates the trust is called the "instrument of trust."

Creation of trust
the trusts act, 1882 section 4,6,7

Requirement to create trust.

• A trust is created when the person setting it up (author) clearly indicates:

• Their intention to create trust.

• The purpose of trust.

• Who will benefit (beneficiary).

• The property involved (trust property).

• The property must be transferred to the trustee (unless the author is the trustee, or
the trust is created through a will.
It must have lawful purpose

• Trust can only be created for a legal purpose.

• A purpose is considered unlawful if:

• It's forbidden by law.

• It undermines existing laws.

• It's fraudulent.

• It harms someone's person or property.

• It's considered immoral or against public policy.

• If the purpose of a trust is unlawful, the entire trust is void

Trust may be created by every person competent to contract and, with the permission of a
principal civil court of original jurisdiction, by or on behalf of a minor.

Trustees’ duties, liabilities, rights and powers

Trustee duties

Follow the rules: fulfill the trust's purpose and follow the creator's instructions (unless all
beneficiaries agree on revisions).

Act fairly and carefully: put the beneficiaries first, prevent conflicts of interest, and handle
funds properly.

Be transparent: keep solid records and tell beneficiaries about the trust.

Protect the assets: take reasonable precautions to protect the trust property.

Benefit distribution: distribute trust income and principal to beneficiaries in accordance with
the trust instrument.
Seeking assistance: hire experts when needed for trust management.

Trustee liabilities

Breach of trust: to be held personally accountable for financial losses or other damage resulting
from failure to fulfil their obligations.

Negligence: the duty of care indicates possible fault for negligent management.

Self-dealing: trustees cannot profit personally from the trust.

Trustee rights:
right to title deeds: have the trust document and any ownership documents connected to the
trust property.
Right to reimbursement: receive reimbursement for reasonable expenditures spent in managing
the trust.
Right to recover overpayments: recover any overpayments given to beneficiaries from their
trust share.
Right to seek indemnity: recover money from someone who profited from a breach of trust.
Right to seek judicial advice: receive judicial help on managing trust property.

Trustee powers:
power to manage assets: this may include buying, selling, or maintain trust assets according to
the trust's purpose and investing guidelines.
Power to distribute income and principal: pay trust benefits to beneficiaries in accordance
with the trust agreement.
Power to delegate duties: hire agents or consultants to help with certain duties, but the trustee is
ultimately liable.
Removal of trustees

A trustee's position ends in a few ways:

1. Natural endings:
o The trust itself finishes.
o The trustee completes all their assigned tasks within the trust
2. As per the trust document:
o The document creating the trust might have specific ways a trustee can be
discharged.
3. Replacement:
o A new trustee is appointed by the court to take over.
4. Agreement:
o The trustee and all beneficiaries who can make legal decisions agree to the
discharge.
5. Court order:
o A judge decides to remove the trustee upon a petition.

 A trustee's office is vacated when he dies or is discharged.

Revocation of trusteeship

The law states that you can change your mind about a trust, but it depends on how you put it up.

Wills: if you form a trust through your will, you have the option to terminate it at any moment
before death.

Other trusts: it is more difficult to revoke trusts created while you are alive.

Beneficiary agreement: everyone who receives something from the trust (beneficiaries) must be
of legal age and willing to cancel.
Power of revocation: if you inserted a clause in the document creating the trust allowing you to
revoke it, you can revoke it.

Debt repayment trust: if you created a trust to pay off debts but have yet to inform your
creditors, you can withdraw it. However, once they are notified, you will want their agreement to
cancel.

Right and liabilities of a beneficiary

Access to information and rents/profits:

 You have the right to view the contract of trust and financial information.
 You can acquire information on how the trust asset is managed.
 You are entitled to any rentals or profits earned by the trust assets, as specified in the trust
instrument.

Control and management:

 In exceptional circumstances, with the permission of all beneficiaries, you can demand
that the trustee transfer the assets to you.
 You cannot cancel the trust unless it is authorized under the contract, or it is a debt-
repayment trust that you have not yet told creditors about.

Protection and enforcement:

 The law requires the trustee to administer the trust property appropriately and
responsibly.
 If the trustee mismanages the trust or fails to fulfill their responsibilities, you may take
legal action.
 If there is no trustee or they are unable to act, you may file a court lawsuit to guarantee
the trust is still acknowledged.

Dealing with the trustee:

  You can hold the trustee accountable for their conduct and require them to carry out their
obligations as stipulated in the trust deed.
 If the trustee misbehaves or is unable to execute their duties, you may seek their removal
through legal action.

Transferring your rights:

 You can normally transfer your beneficiary rights to someone else by following specific
legal demands.

Breach of trust and its legal remedy under the trust act
Basically, if a trustee makes a mistake (breach of trust), they must pay the consequences. Here's
what they are responsible for:

Fixing the loss: the trustee is responsible for resolving any financial losses caused by their error.
This might include replacing missing items or money.

interest payments (usually): they usually owe interest on the funds involved in the breach.

 Exceptions: they do not due interest if they did not earn any interest or if someone
else duped them into making a mistake.

Interest rates vary based on the situation:

Simple interest (standard): the typical interest rate for most misconduct.

Compound interest (worse case): this is a harsher penalty for cases where the trustee misused
the trust money in a business.

beneficiary's choice: in some circumstances, the beneficiary has the option of receiving
compound interest or the real earnings resulting from the trustee's misconduct.

Here are some instances of what a trustee may owe.

Lost property: if they lose trust property via carelessness, they must replace it.
Delayed sale: if they wait too long to sell anything as advised, they are responsible for any loss
in value.

Late payment: if they delay making a payment to a beneficiary, they must pay interest
throughout the waiting time.

wrong investment: if they invest the money inappropriately, they may be liable for the
difference between their actions and a suitable investment.

Advantages and disadvantages of trust:

Advantages of trusts

Asset protection: trusts may protect assets from creditors, litigation, and even future spouses
after a divorce. Property placed in a trust becomes the property of the trust rather than the
individual. This can be beneficial to those who are concerned about potential financial risks.

Estate planning: trusts facilitate the distribution of your assets after your death.

Controlled distribution: you can specify in the trust instrument how and when beneficiaries
receive trust property. This gives you influence over how the funds are spent, particularly if you
are concerned about a beneficiary's capacity to manage money properly.

Dependent care: Trusts can offer financial stability for dependents who have specific needs or
who struggle with money management. The trust will ensure that they obtain the resources they
require over time while following your instructions.

Philanthropic giving: trusts can be utilized for charitable reasons, to make sure your gifts keep
benefiting the causes you care about after your death. You can choose which charity get funds
and in what amounts.
The disadvantages of trusts

Cost: there may be legal and administrative expenses associated with establishing and
maintaining a trust. Depending on the intricacy of the situation, trust management may incur
continuous expenditures.

Loss of control: when assets are placed in a trust, you often lose some control over them. The
trust document governs distributions, and revisions are difficult to make.

Complexity: trusts may be complex by laws, and mistakes may cause unexpected consequences.
Consulting with an expert lawyer is critical to ensuring that the trust is well-organized and
achieves your goals.

Tax consequences: trusts may have tax consequences, depending on the form and structure.
Before forming a trust, you should be aware of the potential tax consequences.

Depending on the jurisdiction, some trust papers may become public record. This implies that
certain information about the trust, such as its assets and beneficiaries, may be made public.

Extinction of trust
A trust extinction when one of these things happens:

Goal achieved: the main reason for the trust's existence is complete.

 Example: trust to educate a child ends when the education is finished

Illegal goal: the purpose of the trust becomes illegal.

 Example: trust to fund a crime ends

Impossible goal: something happens that makes it impossible to do what the trust was set up for.

 Example: trust to invest in a company that goes out of business

Revoked: if the trust allows changes, the person who created it can cancel it.

 Exceptions: this isn't allowed with all trusts

Conclusion and recommendations
Under bangladesh’s trusteeship laws trust assets are managed responsibly and fairly (equitably)
for the benefit of the beneficiaries. Trustee duties the law defines trustees' fiduciary obligations,
which require them to behave in the best interests of their beneficiaries. Trusts provide benefits
for estate planning and wealth management. The law gives trustees advice and protection,
allowing them to carry out their responsibilities successfully.

Recommendation for law change

The advice focuses on beneficiary rights while transferring trust property.

Beneficiaries with requirements can now request that trust property be transferred to them. The
recommendation advises reducing limitations on beneficiaries' ability to request a transfer of
trust property, thus providing them with greater control.

This proposal would revise sections 56 and 58 of the trust Act of 1882.

Section 56: the final paragraph, which may limit beneficiaries' rights to request a transfer, would
be repealed.

Section 58: the provision that may limit beneficiaries' ability to transfer their stake in the trust
will be removed.

These adjustments might possibly offer beneficiaries greater power over the trust property.

I hope the legal system will improve in the future.