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

[Link] person who reposes or declares the confidence is called the

author of trust or settler.
[Link] person who accepts the confidence is called the trustee.
[Link] person for whose benefit the confidence is accepted is called
the beneficiary.
[Link] subject-matter of trust is called the trust-property or the trust-
money.
[Link] object of trust should be legal.
[Link] may be a instrument of trust (i.e. trust deed)
[Link] 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.
[Link] 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.
[Link] 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.