TRANSFER OF PROPERTY

UNIT 5
Define trust. Explain the different kinds of trust
The word trust is derived from a latin word OPUS which means ‘on his
behalf’. Trust is a fiduciary relationship between the person on whom
the property or power is entrusted for the benefit of another. It may be
said to be a relationship where one of them is duty bound to exercise
his rights and powers in good faith for the benefit of another.

According to section 3 of indian trust act, 1882, trust is defined as

an obligation annexed to the ownership of the property, arising out of
confidence reposed in, accepted by the owner, or declared and
accepted by him, for the benefits of another or of another and the
owner

Three things pointed out in the definition:

1. maker of trust / settlor: the person who makes the trust is
called the creator or the author of trust. He is the person who
declares trust. The author of the trust earmarks some property
for the trust. This property is called the trust property or the
subject matter of the trust. The property may be movable or
immovable.

2. Trustee: the person or firm which holds and administers such

trust is called the trustee. The author can name any person as the
trustee in the trust deed. However, the trustee has to accept such trust

3. Beneficiary: the person for whose benefit the trust is made is

called the beneficiary of the trust.

Kinds of trust
Based on the purpose of trust, it is divided into
1. Private trust: a private trust is created for the benefit of a
specific individual or families. It is constituted for the benefit of
 one or more individuals who are ascertained. Private trusts have
trustees who are responsible for managing the trust property and
ensuring that the interests of the beneficiaries are protected. The
settlor can also be a trustee.
Private trusts are established for a wide range of purposes,
including for the welfare of the beneficiaries, for providing
financial support or for the management of specific assets .
In some cases private trust may be revocable, which means the
settlor retains the right to modify or revoke the trust during their
lifetime. These types of trust provide a high level of flexibility in
changing or altering the terms of the trust to specific needs and
preferences of the settlor and the beneficiaries.

2. Public trust: a public trust is created for the benefit of the

general public or a particular section of the public. It is established
with an aim of promoting charitable, religious or educational purposes.
They may include trust for the maintenance of public amenities, relief
of poverty, advancement of education, etc. the provisions of the Indian
trust act,1882 does not apply in case of public trust. Prerequisites are
a. A declaration of trust, which is binding on the settlor
b. Setting apart certain property by settlor and thereby
depriving himself of the ownership rights
c. A statement of the object for which the property is
thereafter to be held , ie, the beneficiaries.
Write a note on precatory trust
The word trust is derived from a latin word OPUS which means ‘on his
behalf’. Trust is a fiduciary relationship between the person on whom
the property or power is entrusted for the benefit of another. It may be
said to be a relationship where one of them is duty bound to exercise
his rights and powers in good faith for the benefit of another.

According to section 3 of indian trust act, 1882, trust is defined as

an obligation annexed to the ownership of the property, arising out of
confidence reposed in, accepted by the owner, or declared and
accepted by him, for the benefits of another or of another and the
owner
Three things pointed out in the definition:
1. maker of trust / settlor: the person who makes the trust is
called the creator or the author of trust. He is the person who
declares trust. The author of the trust earmarks some property
for the trust. This property is called the trust property or the
subject matter of the trust. The property may be movable or
immovable.

2. Trustee: the person or firm which holds and administers such

trust is called the trustee. The author can name any person as the
trustee in the trust deed. However, the trustee has to accept such trust

3. Beneficiary: the person for whose benefit the trust is made is

called the beneficiary of the trust.

Under the Indian trust act,1882, precatory trust is recognized as a type

of trust that is created through the expression of a wish, hope or moral
obligation by the settler rather than by a command.
A precatory trust is established when a person indicates their desire
for a certain property to be used or preserved for the benefit of
another person or for a specific purpose.

The key points include

1. Expression of intent: a precatory trust is formed when the
settlor expresses their wish, hope or moral obligation that certain
property be held, used or preserved for the benefit of a particular
individual or purpose.

2. Lack of legal obligation: unlike other types of trusts, precatory

trust does not impose a legally binding obligation on the trustee to
carry out the settlor’s expressed wishes.

3. Trustee’s discretion: the trustee has discretion in deciding

whether or not to follow the settlor’s expressed wishes. They may take
the settlor’s intention into consideration but they are not legally bound
to act upon it.

4. Moral or ethical duty: the effectiveness of a precatory trust

hinges on the trustee’s sense of moral or ethical duty to fulfill the
settlor’s expressed wish

5. Evidence of intent: to establish a precatory trust, there must

clear and convincing evidence of the settlor’s intent to create a trust

6. Enforcement challenges: precatory trust can be challenging to

enforce in the court of law due to their non-binding nature.
Eg: a parent wishing that their child will use a portion of their
inheritance for educational purposes.
Define trust. Explain the essentials of a valid
trust
The word trust is derived from a latin word OPUS which means ‘on his
behalf’. Trust is a fiduciary relationship between the person on whom
the property or power is entrusted for the benefit of another. It may be
said to be a relationship where one of them is duty bound to exercise
his rights and powers in good faith for the benefit of another.

According to section 3 of indian trust act, 1882, trust is defined as

an obligation annexed to the ownership of the property, arising out of
confidence reposed in, accepted by the owner, or declared and
accepted by him, for the benefits of another or of another and the
owner

Parties to the trust

1. maker of trust / settlor: the person who makes the trust is
called the creator or the author of trust. He is the person who
declares trust. The author of the trust earmarks some property
for the trust. This property is called the trust property or the
subject matter of the trust. The property may be movable or
immovable.

2. Trustee: the person or firm which holds and administers such

trust is called the trustee. The author can name any person as the
trustee in the trust deed. However, the trustee has to accept such trust

3. Beneficiary: the person for whose benefit the trust is made is

called the beneficiary of the trust.

Essentials of a valid trust

 1. intention: the creator of the trust must express his intention to
create the trust. There is no special form of words to be used for
creating trust. The intention to create trust must be construed
from the expression which the settlor has used. Such intention
may be indicated by words or acts with reasonable certainty.
If the settlor does not communicate his intention of who will be
the trustee, then it shall not effect the trust

2. A defined purpose/object: it is a rule of law that in order to

make the trust valid, the object of the trust must be so identifiable that
the court may be in a position to administer the trust. If the object of
the trust is not ascertained, then the trust is void.

3. Beneficiaries: the beneficiaries must be clearly identifiable. It

should be possible to determine who will benefit from the trust
although the actual number of beneficiaries may not be fixed.

4. Trust property: for a trust to be valid, there must be reasonable

certainty about the subject matter of the trust. There cannot be a trust
if the property is not specifically identified
 Ram ran vijay prasad singh v. province of bihar
It was held that a mere wish or direction given to the
executor who may be in the enjoyment of any property
either as a legatee to preserve and maintain such
institution in the manner a settlor had been doing does not
amount to a valid trust because the trust property is not
indicated with reasonable certainty

5. Transfer of property: for a trust to be valid, the trust property

must be transferred to the trustee by the settlor of the trust. According
to section 6 of the Indian trust act 1882, the property must be
transferred in favor of the trustee.
 Ganesh lal sharma v. snehalata dassi
 The court held that the word ‘arpan’ used in the deed to
give the property indicates a fair transfer in favor of the
trustee as per section 6 of the indian trust act 1882

6. Lawful purpose: section 4 of the indian trust act states that trust
must be created for a lawful purpose. The purpose of the trust is lawful
unless it is forbidden by law or is of such a nature that if permitted it
would defeat the provisions of some other law

Explain the rights and liabilities of a trustee (or)

explain the duties and powers of a trustee

The word trust is derived from a latin word OPUS which means ‘on his
behalf’. Trust is a fiduciary relationship between the person on whom
the property or power is entrusted for the benefit of another. It may be
said to be a relationship where one of them is duty bound to exercise
his rights and powers in good faith for the benefit of another.

According to section 3 of indian trust act, 1882, trust is defined as

an obligation annexed to the ownership of the property, arising out of
confidence reposed in, accepted by the owner, or declared and
accepted by him, for the benefits of another or of another and the
owner

Parties to the trust

4. maker of trust / settlor: the person who makes the trust is
called the creator or the author of trust. He is the person who declares
trust. The author of the trust earmarks some property for the trust.
This property is called the trust property or the subject matter of the
trust. The property may be movable or immovable.

5. Trustee: the person or firm which holds and administers such

trust is called the trustee. The author can name any person as the
trustee in the trust deed. However, the trustee has to accept such trust

6. Beneficiary: the person for whose benefit the trust is made is

called the beneficiary of the trust.

Duties and liabilities

Section 11 to 22 states the duties and liabilities of the trustee

1. To execute the trust: a trustee is duty bound to fulfill the

purpose of the trust and follow the direction given by the author
of the trust and use his discretion(if given) in a fair manner
Direction of the trust may be modified with the consent of all
beneficiaries. But if the beneficiary is a minor, his consent may
be given by principal civil court

2. To inform himself of the state of trust property: it is the duty

of the trustee to acquaint himself regarding the status of the trust
property and to obtain a first hand report of the trust property. He must
assure himself that the trust property is in proper state of investments
3. To protect the title of trust property: the trustee shall defend
all suits against the trust property. He shall preserve the trust property
and protect the title of the property

4. Not to set up title adverse to beneficiary: this is a negative

duty of the trustee where he as to abstain from setting up any title
which is adverse to the interest of the beneficiaries

5. To exercise reasonable care: the trustee shall exercise the

same care and caution which he has towards his property in handling
the trust property. He must deal with the trust property as carefully as
a man of ordinary prudence would deal with such property
6. To convert perishable property: if the property is of a
perishable nature, then the trustee must convert the trust property into
a permanent and profitable property

7. To be impartial: when there are more than one beneficiaries,

the trustee shall not execute the trust for the benefit of any one of the
beneficiaries at the expense of the others

8. To prevent waste: if the trust property is in the hands of one

among the several beneficiaries, who threatens to commit waste of
the property which may cause injury to the interest of other
beneficiaries, then the trustee must prevent the waste of such property

9. To keep accurate accounts: the trustee is duty bound to

maintain the books of accounts of the trust property in a clear and
proper manner at all times

10. To invest trust funds: when the property of trust is money, in

the absence of any direction, the trustee shall invest such money in
the following securities - government stocks, bonds, debentures, etc
11. To sell the property within reasonable time: when the trustee
is directed to sell the trust property within a specific time, then he is
duty bound to sell that property within that given time.

Liability of the trustee

1. Liability for breach: when the trustee commits a breach of trust,
he is liable to make good for the loss caused to the trust property
or the beneficiaries
He is liable to pay interest in the following cases
a. Where he has actually received interest
b. When there is unreasonable delay in paying the trust money to
the beneficiaries
c. When the trustee ought to have received interest but has not
done so

2. No set off allowed to trustee: a trustee cannot set off a loss

caused to due a breach to a part of the trust property by taking the
profits earned from another part of the trust property. It is a breach
committed by him and hence he is personally liable to make good of
the loss

3. No liability for the acts of his predecessor: when a trustee

succeeds another, he is not liable for the acts or defaults of his
predecessor

4. Several liability of co trustee: when the co trustees jointly

commits a breach of trust, they are liable to the beneficiaries for the
whole loss caused
5. Liability when the beneficiary’s interest is forfeited: when the
trust property is forfeited to the government by an order of the court,
the trustee is bound to hold the trust property to the extent of such
interest for the benefit of such person as the government may direct
6. Indemnity of the trustee: the trustee is indemnified against any
loss caused by the banker, broker or any such person in whose hand
the trust property was placed. He shall not be liable for involuntary
losses.

Rights and powers of the trustee

1. Right to title deed: a trustee has a right to have all the

documents relating to the title of the trust property

2. Right to reimbursement of expense: `the trustee is entitled to

reimburse himself of all the expenses incurred by him for the trust
property.

3. Reimbursement of fees to council: the trustee is entitled to

claim reimbursement for the expenses incurred by him as fees to the
advocates in a suit regarding the trust property, traveling expense and
expenses for the management of the trust property

4. Right to apply to the court for opinion in the management of

the trust: a trustee can obtain the opinion of the court by filing a
petition regarding the management of the property. Such opinion shall
be in the form of guidance

5. Right to settle the accounts: when the duties of the trustee is

completed, he has the right to settle the accounts with the
beneficiaries
6. Power to sell: the trustee has the power to sell the trust property
either by public auction or by private contract , at one time or at
intervals unless the trust deed says otherwise
7. Power to apply property of minors for their maintenance:
when the beneficiary is a minor,the trustee shall use the funds for the
maintenance of such a minor

Vesting power: when there are several trustees, the power may be
exercised by all. But if any one of the trustee dies, the the power may
be exercised by the remaining trustee unless the trust deed says
otherwise