Law of Trusts- Unit 4.pptx
- 1. Established as per the Section 2(f) of the UGC Act, 1956 Approved by AICTE, COA and BCI, New Delhi Unit 4- Part A Law of Trusts S c h o o l o f L e g a l S t u d i e s R a d h i k a B e l a p u r k a r
- 2. WHAT IS TRUST? • According to Indian Trust Act, trust means an obligation annexed to the ownership of property, & arising out of a confidence reposed in & accepted by the owner for the benefit of another or for another and owner. • Mr. X wants to pass his bungalow (property) to Mr. Y for the benefit of his minor granddaughter. Mr. X passes his property to Y, because he reposes(has) confidence on Y. This is nothing but the essence of a trust.
- 3. TRUST CONT. The person who declares the confidence is called the author of the trust. The person who accepts the confidence is called trustee. The subject matter of the trust is called trust property or trust monetary. The written document through which trust is created is called instrument of trust. The person whose benefit the confidence is accepted is called beneficiary.
- 4. TRUST v. DEBT There a loan has been made the borrower becomes the absolute owner of the money lent, subject to a contractual obligation to repay the loan or to perform some other obligation specified in the loan agreement. The borrower is free to spend the money however they like. Debt When a trust has been created, the trustee holds only legal title to the trust property, the equitable title being held by the beneficiary. The trustee is not free to spend the money as they wish but must keep it separate from their own money and apply it only for the purposes of the trust. Trust
- 5. TRUST v. BAILMENT Trustee is equitable A trustee is the full owner of the property. the subject matter of a trust can be either movable or immovable. Trust Bailment is a common law concept In bailment, the owner transfers physical possession of personal property for a particular time, but retains ownership. Only movable property can be bailed. Bailment
- 6. TRUST v. AGENCY A trustee is the full owner of the trust property. A trustee acts in his own right. If a trustee dies, trust is not terminated. A new trustee is appointed. Trust An agent has no title to the property An agent acts on behalf of his principal and is subject to his control. At common law the relationship of principal and agent terminates on the death of either Agency
- 7. TRUST v. CONTRACT In a trust unless the settlor has reserved a power of revocation, the trust can only be varied through the consent of all beneficiaries or court order. Trust The terms of a contract can only be varied by the original contracting parties. Contract
- 9. PUBLIC TRUST • It is further divided into charitable and religious trust. • There is no Central Act applicable to Public Trusts. Various states have enacted their own statutes. • Trusts designed for the benefit of a class or the public generally.
- 10. PUBLIC TRUST • It is easy to register and manage public trusts. • It is of permanent character once opened, it cannot be terminated; funds cannot be deviated for any other purpose than the defined objective of it. • Duration of trust is indefinite.
- 11. PRIVATE TRUST • A trust is called a private trust when it is constituted for the benefit of one or more individuals who are ascertained. • Private trusts are governed by the Indian Trusts Act, 1882. • Private trust may be for limited period for a limited purpose. It may be modified, or determined as per the trust deed.
- 12. CREATION OF TRUST • Section 4 of the Indian Trust Act,1882. • The elements of valid trust is given under section 4 of the Act.
- 13. CREATION OF TRUST Intention of the author to create the trust. Purpose of the trust. The monetary asset is assigned for the benefit of the trustee. Gives control or transfer the trust property to the trustee which includes intention of the author. Trustee can claim expenses & salary from the benefits from the trust of his work.
- 14. A VALID TRUST REQUIRES FOUR CERTAINTIES Certainty of author’s intention; Certainty of trust property. Certainty of object; Certainty of beneficiary;
- 15. APPOINTMENT OF TRUSTEES • A new trustee can be appointed in any of the following case: 1. Any person appointed as trustee disclaims; or 2. Death of trustee; or 3. For continuous 6 months, the trustee is absent from India; or 4. Leaves India to reside abroad; or 5. Is declared insolvent; or
- 16. APPOINTMENT OF TRUSTEES 6. Desires to be discharged from the duties; or 7. In the opinion of the court is unfit; or 8. Personally incapable to act in the trust.
- 17. APPOINTMENT OF TRUSTEES • The new trustee can be appointed by a person nominated for that purpose in the instrument of trust. • The appointment has to be by writing and under the signature of the person making it. • The court can appoint the official trustee in any case in which only one trustee may be appointed and such trustee is to be the sole trustee.
- 18. APPOINTMENT BY COURT • On the application of the beneficiary, a court may appoint a trustee or new trustee. • While appointment, the court has to look into the following aspects: 1. The wishes of the author of the trust as per the instrument of trust. 2. The wishes of the person who was empowered to appoint a new trustee.
- 19. APPOINTMENT BY COURT 3. The question whether the appointment will promote or impede the execution of thee trust. 4. The interest of all beneficiaries if there are more than one beneficiaries.
- 20. DUTIES OF TRUSTEE 1. Execution of Trust 2. Acquaintance of Trust Property 3. Protection of Title of Trust Property 4. Not to set up Title adverse to the beneficiary 5. Take care of the Trust Property
- 21. DUTIES OF TRUSTEE 6. Convert perishable property 7. Be impartial among the beneficiaries 8. Protect the trust property from adverse beneficiary 9. To maintain and keep books and accounts 10. Investment of Trust money
- 22. LIABILITIES OF TRUSTEE 1. Liability for a breach of Trust 2. No right of set-off 3. A trustee is not liable for the acts and defaults of his predecessor. 4. The position and nature of liability of co-trustees 5. Under Section 23 of the Act, in certain circumstances, a trustee is liable to pay simple or compound interest to the beneficiary.
- 23. RIGHTS OF THE TRUSTEES 1. Right to Title deed 2. Right to reimburse expenses incurred for trust purposes 3. Right to indemnity from breach of trust 4. Right to seek Court’s opinion in managing trust property 5. Right to Settle accounts 6. Right to do all necessary acts in the interest of trusts.
- 24. POWERS OF TRUSTEE 1. The trustee can sell the trust property where instrument of the trust so empowers him. 2. A trustee has a power to vary investments. 3. Maintenance of minors.
- 25. POWERS OF TRUSTEE 4. A trustee can give receipt for the money received on account of the trust. 5. In case of death of one of the trustees, the other trustees have a right to act. 6. Power to settle disputes.
- 26. DISABILITIES OF TRUSTEE 1. A trustee who once accepted the trust, cannot renounce it except: • (i) with the permission of the Court, • (ii) with the consent of the beneficiaries who are competent to contract, • (iii) by virtue of a special power in the instrument of the trust. 2. A trustee cannot delegate his office or any of his duties either to a co-trustee or to a stranger, except in the following cases: • When the instrument of the trust so provides, • When such a delegation is in the regular course of business, • When such a delegation is necessary, and • The beneficiary, being competent to contract, consents to such a delegation.
- 27. DISABILITIES OF TRUSTEE CONT. 3. Co-trustees cannot act singly 4. The trustees cannot exercise their discretionary powers arbitrarily 5. Trustee not to charge for services 6. A trustee may not use or deal with the trust property for his own use
- 28. DISABILITIES OF TRUSTEE CONT. 7. No trustee whose duty is to sell the trust property may directly or indirectly buy the trust property 8. No trustee and no person who has recently ceased to be a trustee may, without the permission of the Court, buy, or become mortgagee or lessee of the trust property. 9. The trustee and the co- trustee may not lend the trust amount to themselves
- 29. BENEFICIARY • The person or persons for whose benefit, a trust has been created, is called the beneficiary or beneficiaries. • The beneficiary holds the beneficial interest in that property.
- 30. RIGHTS OF THE BENEFICIARY 1. Right to Rents and Profit 2. Right to specific execution 3. Right to inspect Accounts 4. Right to transfer beneficial interest 5. Right to sue for Execution of Trust
- 31. RIGHTS OF THE BENEFICIARY 6. Right to proper Trustees 7. Right to follow the trust property in the hands of a third person 8. Right to compel to any act of duty.
- 32. LIABILITIES OF BENEFICIARY 1. When one beneficiary out of the several commits the breach of trust. 2. Where the beneficiary has an intention to obtain an advantage from the breach without the consent of the other beneficiaries; 3. The beneficiary is aware of the breach of trust which is committed or there is an intention to commit it. The beneficiary either conceals it or does not take any appropriate action to protect the interest of other beneficiaries; 4. Where he deceives the trustee and induces him to commit breach of trust. 5. The other beneficiaries may attach the interest of such a beneficiary until the loss caused by the breach has been compensated.
- 33. VACATING THE OFFICE OF TRUSTEE • The office of a trustee may be vacated either by his death or by his discharge from his office. • He may be discharged from his office by the extinction of the trust or by the completion of his duties or by new appointee etc.
- 34. EXTINCTION OF TRUSTS • The extinction of trusts can happen: 1. When its purpose of fulfilled; or 2. When its purpose becomes unlawful; or 3. The fulfilment of the trust’s purpose becomes impossible due to destruction of trust property or due to any other reason; or 4. When the trust being revocable, is revoked.