CHANAKYA NATIONAL LAW UNIVERSITY

NYAYA NAGAR, MITHAPUR, PATNA - 800001

FINAL DRAFT SUBMITTED IN THE FULFILMENT OF THE COURSE

TITLED –

PROPERTY LAW
On The Topic
CRITICAL ANALYSIS ON INDIAN TRUST ACT

SUBMITTED TO: - SUBMITTED BY: -

DR. B. RAVI NARAYAN SARMA
ASSISTANT PROFESSOR OF LAW
NAME: KARAN SINGH RAUTELA
SEMESTER: III
ROLL NO.: 1736
COURSE: B.A., L.L.B(HONS)
SESSION: (2017-2022)
 DECLARATION

I hereby declare that the project entitled “CRITICAL ANALYSIS ON INDIAN TRUST ACT”
submitted by me at CHANAKYA NATIONAL LAW UNIVERSITY is a record of bona fide project
work carried out by me under the guidance of our mentor Dr. B. RAVI NARAYAN SARMA. I further
declare that the work reported in this project has not been submitted and will not be submitted, either
in part or in full, for the award of any other degree or diploma in this university or in any other
university.

I
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Dr. B. Ravi Narayan
Sarma, Assistant Professor of Law, who gave me the golden opportunity to do this wonderful
project on the topic and who also helped me in doing a lot of Research and I came to know
about so many new things I am really thankful to him. Secondly, I would also like to thank my
parents and friends who helped me a lot in finishing this project within the limited time. I am
making this project not only for marks but to also increase my knowledge.

II
 TABLE OF CONTENTS
1.CONCEPT OF TRUST........................................................................................................................ 1
AIMS AND OBJECTIVES ................................................................................................................ 3
HYPOTHESIS .................................................................................................................................... 3
RESEARCH METHODOLOGY........................................................................................................ 3
SOURCES OF STUDY ...................................................................................................................... 3
LIMITATIONS OF THE STUDY...................................................................................................... 3
RESEARCH QUESTIONS ................................................................................................................ 4
2. HISTORICAL PERSPECTIVE OF INDIAN TRUST ACT, 1882 .................................................... 5
2.1 IN ENGLAND: TRUSTS HISTORICALLY TRACEABLE TO USES ........................................................ 5
2.2 IN INDIA ........................................................................................................................................ 6
3. SCOPE, OBJECT AND AIM OF INDIAN TRUST ACT, 1882 ....................................................... 9
3.1 CREATION OF TRUST ..................................................................................................................... 9
3.2 TYPES OF TRUSTS ....................................................................................................................... 11
3.3 DUTIES AND LIABILITIES OF TRUSTEES ...................................................................................... 13
3.3.1 DUTIES OF TRUSTEES ........................................................................................................... 13
3.3.2 LIABILITIES OF TRUSTEES..................................................................................................... 14
4. SALIENT FEATURES OF INDIAN TRUST ACT, 1882 ............................................................... 16
4.1 ADVANTAGES .............................................................................................................................. 16
4.2 DISADVANTAGES OF A TRUST ..................................................................................................... 17
5. CONCLUSION AND SUGGESTION ............................................................................................. 19
BIBLIOGRAPHY ................................................................................................................................. 20

III
 1.CONCEPT OF TRUST
Indian Trusts Act, 1882 is an Act in India related to private trusts and trustees. The act defines
what would lawfully be called as a trust and who can be legally its trustees and provides
definition for them. The Indian trusts amendment bill of 2015 amended the act and removed
some restrictions on investment of the monetary assets by the trust in certain investments. But
at the same time enabled the government to scrutinize the trusts investments at will.

The act defines how the author of the trust could create a trust and assign trustees and assign
his monetary assets to be controlled by the trust. This trust should have a clear definition of

 Intention by the author to create the trust

 Purpose of the trust
 The beneficiary of the monetary assets controlled by the trust
 The monetary assets assigned to the trust for the purpose defined above
 Grants control of the monetary assets to the trustee which can include the author of the
trust

In addition, the act also explains trustees

 have to be impartial
 cannot convert property and monetary assets to profitable property outside the limits of
the purpose for which the trust was created
 have to understand completely the statutes of the trust
 can benefit from being the trustee by claiming expenses and salary from the trust for
his work
 can sometimes act singly if required
 cannot breach the trust of the author or the purpose of the trust.

Through a private trust, assets or wealth are transferred by one party (settlor) to be held by
another party (trustee) for the benefit of a third party (beneficiaries), under the Indian Trusts
Act, 1982. As per section 3 of Indian Trust Act 1882 “A trust is an obligation annexed to the
ownership of the property, and arising out of a confidence reposed in and accepted by the

1
owner, or declared and accepted by him, for the benefit of another, or of another and the
owner”.1

1
Section 3 of Indian Trusts Act, 1882

2
AIMS AND OBJECTIVES

 to critically analyse the Indian Trusts Act, 1882

 to find out the pros and cons of this act

HYPOTHESIS

The researcher has presumed

 that Indian Trusts Act give the people the right to be trustees
 the researcher presumes that this act prevents other people from being wrongful
trustees.2

RESEARCH METHODOLOGY

In this project Doctrinal Method will be used. Doctrinal Methods refer to Library research,
research or processes done upon some texts writings or Documents, legal propositions and
Doctrines, Articles, Books as well as Online Research and Journals relating to the subject.

SOURCES OF STUDY
 Primary sources: Case Law, Legal Sources, Acts, etc.
 Secondary Sources: Newspapers, journals, periodicals, etc.

LIMITATIONS OF THE STUDY

There are various hindrances which can be faced by the researcher during the formation of this
project such as scarcity of time, expensive legal materials for various research works, research
done by an individual.

3
RESEARCH QUESTIONS

1. What is the purpose of Indian Trusts Act, 1882?

2. How this act benefits the rights and privileges of the trustees ?
3. How this act prevents illegal transfer of trusteeship?

4
 2. HISTORICAL PERSPECTIVE OF INDIAN TRUST ACT, 1882

2.1 IN ENGLAND: TRUSTS HISTORICALLY TRACEABLE TO USES

The modern trusts are the successors of what were originally called uses. When property was
conveyed to A to the use of B, A had only the legal or technical ownership while B had the
beneficial interest. Conveyances to uses were originally resorted to by the tenants to deprive
the lords of their services, the creditors of their dues and the wives of their dower. Although
uses were thus conceived in fraud, they subserved the public interest.3 By having recourse to
uses, testamentary dispositions were rendered possible, livery of seisin was dispensed with and
the Statutes of Mortmain could be circumvented.

The cestui que use had originally no remedy to enforce the use since the Courts of law refused
to recognise uses. The feoffees to uses as legal owners could abuse the confidence reposed in
them and alienate or charge the property confided to them in any manner they liked and
prejudice the interests of the cestui que use.4 The latter's right to the ownership of the property
was only a moral right for which there was no legal sanction. A remedy was found by John
Waltham, Bishop of Salisbury, and Lord Keeper in the reign of Richard II, who-invented the
Chancery Writ of Subpoena. By this writ feoffees to uses (trustees as they are now called) were
liable to be summoned into the King's Chancery and compelled to answer on oath the
allegations of the beneficial claimant.5 The legal ownership of the feoffee to uses was
recognised by the Chancellor but a duty was imposed on him to perform the trust under pain
of imprisonment. Protection to uses having thus been vouchsafed by the Chancellor, it is said
that by the time of Henry VIII, most of the land in England became vested in nominal owners
for the benefit of other persons who were practically the real owners. In the words of an ancient
common lawyer

"the parents of the use were Fraud and Fear, and a court of Conscience was the Nurse."

The separation of the beneficial from the legal ownership brought about by uses was regarded
by the legislature as a serious evil. The Statute Of uses was passed in 1536 to abolish uses and
to put the beneficial owner immediately into legal possession of any interest in land which was
held by any other to his use. From the first Statute failed partially of its object. It applied only

3
SUBBARAO, G.C.V, Law of Transfer of Property, Vol.I Ed.6, P.no. 491, (ALT Publications, 2009)
4
Ibid
5
HOLDSWORTH, W.S., A History of English Law, vol 4, P.no. 415, (1923)

5
when the trustee was 'seised' of lands for another's benefit. So it affected only trusts of freeholds
and had no application when the trustee had vested in him term of years. The statute further
referred only to passive trusts and not to active trusts where the trustees had some active duty
to perform. The decision in Tyrrell's Case6 soon deprived the Statute of any little effect it ever
had. ln this decision it was held that there could not be a second use limited upon the first use.
The legal estate as transferred by force of the Statute to the person entitled to the first use, while
the second use was void at law. This result frustrated the intentions of the grantor and so the
chancellor again intervened and enforced the second use. Passive trusts of freehold lands thus
become common again. 'Uses upon uses’ were henceforth called Trusts.

A trustee is the legal owner of the trust property. His is a right in rem, i.e. a right available
against the whole world. The beneficiary's interest, on the other hand is strictly speaking not
ownership at all. Technically. the rights of the beneficiary are rights in personam by which the
trustee can be compelled to use his ownership for the benefit of the cestuique trust7. Gradually,
however, these rights came to be recognised in equity as property. The court of Chancery
permitted the beneficiary to deal with his interest in the same manner as the legal ownership
could be dealt with. In English law a trust thus, gives rise to duplicate ownership the property
being owned by two persons at the same time and the relation between the two owners being
such that one of them, the trustee, is under an obligation to use his ownership for the benefit of
the other, namely the beneficiary.

2.2 IN INDIA

Quasi-fiduciary relationships not arising strictly out of trusts are familiar in Hindu law. The
manager of a Hindu joint family, is in a fiduciary relationship to the other coparceners. He is
not, however, subject to all the duties to which trustees are subject. Benami transactions in
which property is purchased in the name of one person for the benefit of another were again
very common among Hindus.

That private trusts could be validly created was recognised by the Privy Council in
Tagore vs. Tagore.8 The rights and liabilities of the parties to the trust were regulated by
reference to the rules of English equity. These rules have substantially been codified in the
Indian Trusts Act of 1882. This Act deals with the law of private trusts and leaves untouched

6
(1557) Dyer 155=73 E.R. 336
7
MARTIN, J.E., Hanbury and Martin: Modern Equity, (19th edn Sweet & Maxwell, 2012)
8
9 Beng. L.R. 377

6
the rules of Muhammadana law as to wakfs. The mutual relations of the members of an
undivided Hindu family and the law relating to charitable and religious endownments.9

Trusts Act is not applicable to religious endowments. Where a person is neither a trustee
nor a beneficiary under trust deed he will have no locus standi to correct private breaches of
trust.

Normally court has no power to authorise sale of trust property except in cases or
emergency or not in cases not foreseen or provided for by the author of the trust. Trustee cannot
claim indemnity unless he suffers an injury for which he may have to be indemnified.10

Where the other trustees had withdrawn the power of one among them and also
informed the person making the payment of such withdrawal of power, the receipt signed by
such trustee will not be binding on the other trustees.

A trustee is not competent to refer a trust dispute to arbitration unless other trustees
also agree for the same.

The law governing the execution of trusts is well settled in case of private trusts, where
there are more trustees than one, all must join in the execution of the trusts.

Where a trust property is managed by several trustees and one of them, not managing
trustee had transferred the property by lease and he had not been appointed as an agent to
perform such execution by other trustees, such transaction is bad in law and it does not convey
any right in favour of transferee.

The worshippers of a temple can maintain a suit for declaration or injunction or

possession to preserve the trust property.

Beneficiary can maintain a suit for possession in the case of alienation by the trustee.
A Quasi-trustee cannot acquire right by adverse possession relating to trust property. While
executing charitable trusts intention of the donor must be observed and court will not be
allowed any departure from the intention of the donor on ground of expediency.11

9
Section 1 of Indian Trusts Act,1882
10
Supra note 1 at 493
11
Ibid

7
It is the duty of the court to protect the trust property from misappropriation and diversion from
the objects to which it is dedicated. Where a person acts as a trustee he is estopped from
challenging the trust. For power to several trustees of whom one disclaims or dies see the
undernoted decisions.

8
 3. SCOPE, OBJECT AND AIM OF INDIAN TRUST ACT, 1882
Trust laws in India are defined and dealt in the Indian Trusts Act. Definition of Trust occurs
in Section 2 of the Act. According to the section, trust means an obligation annexed to the
ownership of property, and arising out of a confidence reposed in and accepted by the owner,
or declared and accepted by him, for the benefit of another, or of another and the owner.12

The person who reposes or declares the confidence is called the “author of the trust”. The
person who accepts the confidence is called the trustee. The person for whose benefit
confidence is accepted is called the beneficiary. he subject-matter of the trust is called trust
property or trust money. Beneficial interest is the interest of the beneficiary. The document or
writing by which trust is created is called the instrument of trust. A trust is thus an acceptance
of an obligation by a person in reference to some property or funds to use or hold it for the
benefit of those for whom the trust is created.

The act defines how the author of the trust could create a trust and assign trustees and assign
his monetary assets to be controlled by the trust. In order to understand its objectives we have
to understand in which conditions the trusts are created and what is the purpose of creating a
trust.

3.1 CREATION OF TRUST

The definition of trust under the trust laws shows that it requires certain features for its
validity. The elements of a valid trust are enumerated in Section 6.

Creation of trust: Subject to the provisions of Section 5, under the Trust laws “a trust is
created when the author of the trust indicates with reasonable certainty by any words of acts
(a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the
beneficiary, and (d) the trust property, and (unless the trust is declared by will or the author of
the trust is himself to be the trustee) transfers the trust property to the trustee”13 under the
trust laws in India.

The first requirement of the trust laws is that the author of the trust should indicate by words
or conduct with reasonable certainty his intention to create a trust. Secondly, the purpose for
which the trust is sought to be created should also appear with reasonable certainty. Thirdly,
the persons for whose benefit the trust it means should be reasonably certain. Lastly, the

12
Section 2 of Indian Trust Act, 1882
13
Section 6 of Indian Trust Act, 1882

9
property, which is to constitute trust property, should be designated with certainty. In the case
of Ranjit Kumar Ghosh vs. Sirish Chandra Bose14, it was held that, since all that beneficiaries
named in the trust deed expired the trust property is to be transferred to the surviving heirs of
the husband of the settlor as envisaged by a clause in the trust deed.

Section 8 of the trust laws requires that the subject-matter of a trust must be property which is
capable of being transferred to the beneficiary. It must not be merely beneficial interest under
a subsisting trust.15 Section 5 of the trust laws provides that if the trust is that of immovable
property, it would be valid if it is declared by a non-testamentary instrument signed by the
author of the trust or the trustee and is also registered or by the will of the author of the trust
or the trustee.16 If the trust is that of movable property it should follow the same pattern as
stated above or the goods should be transferred to the trustee. Where an absolute interest in
property is transferred, the donee is not constituted as a trustee but as an owner under the trust
laws in India. These provisions of the trust laws in India cannot be used for the purpose of
effectuating a fraud. In the case of Davies vs. Whitehead17, certain property had been
transferred by A to her husband to enable him to raise money on mortgage. The
understanding was that the husband should afterwards retransfer the property. It was held by
Stirling J., that this understanding could be proved by parol evidence and that the legal
representatives of the deceased husband could not repudiate the arrangement and plead the
Statute of Frauds.

About the object of the trust, Section 4 of the trust laws in India requires that the purpose
should be lawful. It says that a trust may be created for any lawful purpose. The purpose of a
trust is lawful unless

1. It is forbidden by law; or
2. It is of such a nature that, if permitted, it would defeat the provisions of any law; or
3. It is fraudulent; or
4. It involves or implies injury to the person or property of another; or
5. The court regards it as immoral or opposed to public policy.18

14
AIR 1994 SC 1254
15
Section 8 of Indian Trust Act, 1882
16
Section 5 of Indian Trust Act, 1882
17
(1894) 2 Ch. 133
18
Section 4 of Indian Trust Act, 1882

10
Where the object of the trust is unlawful, the trust is void.

Section 7 of the trust laws in India says that a trust may be created by every person competent
to contract. Where the trust is to be created on behalf of a minor, permission of the principal
Civil Court of original jurisdiction should be obtained.19

3.2 TYPES OF TRUSTS

1. ASSET PROTECTION TRUST

An asset protection trust is a type of trust that is designed to protect a person's assets from
claims of future creditors. These types of trusts are often set up in countries outside of the
United States, although the assets do not always need to be transferred to the foreign
jurisdiction. The purpose of an asset protection trust is to insulate assets from creditor attack.
These trusts are normally structured so that they are irrevocable for a term of years and so that
the trust-maker is not a current beneficiary.20 An asset protection trust is normally structured
so that the undistributed assets of the trust are returned to the trustmaker upon termination of
the trust provided there is no current risk of creditor attack, thus permitting the trustmaker to
regain complete control over the formerly protected assets.

2. CHARITABLE TRUST

Charitable trusts are trusts which benefit a particular charity or the public in general.
Typically charitable trusts are established as part of an estate plan to lower or avoid imposition
of estate and gift tax. A charitable remainder trust (CRT) funded during the grantor's lifetime
can be a financial planning tool, providing the trustmaker with valuable lifetime benefits.21 In
addition to the financial benefits, there is the intangible benefit of rewarding the trustmaker's
altruism as charities usually immediately honor the donors who have named the charity as the
beneficiary of a CRT.

19
Section 7 of Indian Trust Act, 1882
20
Types of Trust, FindLaw, (Sep.06, 2018, 3:52 PM), https://estate.findlaw.com/trusts/types-of-trusts.html
21
Ibid

11
3. SPECIAL NEEDS TRUST

A special needs trust is one which is set up for a person who receives government benefits so
as not to disqualify the beneficiary from such government benefits. Ordinarily when a person
is receiving government benefits, an inheritance or receipt of a gift could reduce or eliminate
the person's eligibility for such benefits.

By establishing a trust, which provides for luxuries or other benefits which otherwise could not
be obtained by the beneficiary, the beneficiary can obtain the benefits from the trust without
defeating his or her eligibility for government benefits. Usually, a special needs trust has a
provision which terminates the trust in the event that it could be used to make the beneficiary
ineligible for government benefits.

Parents of a disabled child can establish a special needs trust as part of their general estate plan
and not worry that their child will be prevented from receiving benefits when they are not there
to care for the child. Disabled persons who expect an inheritance or other large sum of money
may establish a special needs trust themselves, provided that another person or entity is named
as trustee.22

4. PUBLIC AND PRIVATE TRUSTS

A public trust under the trust laws in India is one which is created for the benefit of public in
general. Public in general does not mean public as a whole. The trust may be created for a part
or a section of the public and it will be a valid trust so long as every member of the particular
class is permitted to enjoy the benefits of the trust. The general public purpose may be of any
kind medical, health relief and rehabilitation, social service of any kind, education, training,
etc.

A private trust is confined in its beneficial bounty to some private persons so that nobody
beyond them can draw the benefit. Such a trust is enforceable at the private action of intended
beneficiaries. A public trust is enforceable at the instance of the Attorney-General under the
trust laws in India.23

22
Ibid
23
Trust Laws In India, Legal Help Line India, (Sep.06, 2018, 4:19 PM), http://www.legalhelplineindia.com/trust-
laws-in-india/

12
3.3 DUTIES AND LIABILITIES OF TRUSTEES

3.3.1 DUTIES OF TRUSTEES

Section 11 of the trust laws in India requires the trustee to fulfill the purpose of the trust.24 In
carrying out the purpose of the trust the trustee has to follow the directions of the author given
at the time of the creation of the trust. Such directions may be modified from time to time by
the consent of all the beneficiaries who are competent to contract. Where a beneficiary is
incompetent, consent of the civil court of original jurisdiction will be necessary under the trust
laws in India. The section exempts the trustee from having to obey any directions which would
be impracticable, illegal or manifestly injurious to the beneficiaries. In the case of In Re
Tollmache25 case the court refused to sanction an unauthorised change of investment proposed
on the ground that it would be of advantage to the beneficiaries.

Preservation of trust property is one of the essential functions of trustees under the trust laws
in India. The trustee has to assert his right to the property and to protect the title to the property.
For this purposes the trustee has the power to maintain and defend suits and all other authorities
under the trust laws in India. Subject to the provisions of the instrument of trust and keeping in
mind the nature and kind of trust property, the trustee may do anything which is necessary for
the preservation of the trust property.

Every fiduciary is under a duty not to set up jus tertii against his own beneficiary. An agent,
for example, cannot attempt to retain the property of his principal claiming that it is his
property. No bailee can claim as against his bailor that the property under bailment belongs to
him. Such persons also cannot claim that the property belongs to a third person. So Section 14
makes it a duty of the trustee not to set up any claim to the property either for himself or in
favour of third person.26 In the case of Sri Agasthayar Trust, Madras vs. Commissioner of
Income Tax27, it was held that, the deed of trust did not confer any power upon the founders to
alter or vary the terms of the trust. A change in object of trust is not permissible and the
document purporting such change is of no consequence than a scrap of paper.

The standard of care in reference to trust property expected of a trustee is stated in Section 15.

24
Section 11 of Indian Trust Act, 1882
25
(1903) 1 Ch. 955
26
Section 14 of Indian Trust Act, 1882
27
1998 (5) SCC 588

13
Care required from trustee: A trustee is bound to deal with the trust property as carefully as a
man of ordinary prudence would deal with such property if it were his own; and, in the absence
of a contract to the contrary, a trustee so dealing is not responsible for the loss, destruction or
deterioration of the trust property.

Under the rule stated in the section a trustee has to take as much care of the trust property as a
person of ordinary prudence would have taken of his own property. If his dealing of the trust
property shows the standard of care of a reasonable man, he would not be liable for nay loss,
destruction or deterioration of the trust property. It can, however, be provided in a contract with
him that he would be liable at all events. In such a case he would be liable for loss etc. whether
any negligence on his part is involved or not.

3.3.2 LIABILITIES OF TRUSTEES

Liabilities of trustees are stated in Sections 23 to 30 of the trust laws in India. The liability of
trustee are as follows:–

 Liability for breach of trust:–Where the trustee commits a breach of trust, he is liable to
made good the loss which the trust-property or the beneficiary has thereby sustained unless
the beneficiary has by fraud induced the trustee to commit the breach, or the beneficiary,
being competent to contract, has himself, without coercion or undue influence having been
brought to bear on him, concurred in the breach, or subsequently acquiesced therein, with
full knowledge of facts of the case and of his rights as 28against the trustee.

A trustee committing a breach of trust is not liable to pay interest except in the following cases:

1. Where he has actually received interest;

2. Where the breach consists in unreasonable delay in paying trust-money to the beneficiary;
3. Where the trustee ought to have received interest, but has not done so;
4. Where he may be fairly presumed to have received interest.29

Where the breach consists in failure to invest trust-money and to accumulate the interest or
dividends thereon, he is liable to account for compound interest (with half-yearly rests) at the
same rate;

28
Section 23 of Indian Trust Act, 1882
29
Supra note 23

14
Where the breach consists in the employment of trust-property or the proceeds there of in trade
or business, he is liable to account, at the option of the beneficiary, either for compound interest
(with half-yearly rests) at the same rate, or for the net profits made by such employment. In the
case of Vithaldass vs. Rupchand30, it was held that, Section 23(b) contemplates cases where
there is no obligation on the part of the trustee to pay the trust money to the beneficiary at fixed
intervals or on demand.

Where breach of trust is in two distinct respects, one causing loss and the other bringing a gain,
the trustee cannot say that his liability for the loss should be reduced by set-off against it the
gain caused by the other breach. It follows that if breach of trust causes loss, the trustee has to
bear it. If it brings about a gain it will go to the benefit of trust property. The trustee cannot
claim any reduction in his liability for the loss as against the gain.

Thus, the aim and object of the Indian Trust Act, 1882 is to transfer the trust of property to
another as it is not possible for one person to hold the property forever. So, a right is to be given
to the trustor to transfer the trust to trustee. It can also be used to create a charitable trust for
the welfare of the public. However, it also limits the extensive rights of the trustor and inflicts
a reasonable restriction on the trustor so as not to have wrongful gain to himself or wrongful
loss to another.

30
AIR 1967 SC 188

15
 4. SALIENT FEATURES OF INDIAN TRUST ACT, 1882

In this chapter the researcher will be dealing with the advantages and disadvantages of the
Indian Trust Act, 1882.

4.1 ADVANTAGES
1. AVOID PROBATE : Probate refers to the process of legally establishing the validity of a
Will before a judicial authority. The assets in a trust are distributed in accordance with the
terms of the trust. Your estate, therefore, avoids the cost and delay of probate.31

2. Continuity of management during disability creating a revocable trust ensures that your
property remains available to be used for your benefit, should you become physically or
mentally incapable of managing your own affairs.

3. REMAIN IN CONTROL : A revocable trust gives you full use of your assets while you
are alive and then passes this authority onto a successor trustee after your death. The
successor trustee then distributes the assets to the named beneficiaries.32

4. FLEXIBILITY : Using a funded revocable trust may allow you to name unrelated, out-of-
state individuals and out-of-state trust companies to act as the primary administrator of your
property at death.

5. NO INTERRUPTION IN INVESTMENT MANAGEMENT : Assuming the assets

were previously transferred into the trusts name, there is no need to reregister securities after
death. Depending on the cash needs and investment objectives of the grantors estate, there
may be no need to develop a new investment strategy.

6. A trust can be formed for Charitable/Religious purposes which enables the settlor to
discharge his sentiments for public benevolence, advancement of knowledge etc., in a regulated
and proper way. From taxation point of view, a charitable or religious trust enjoys several tax
exemptions and benefits.33

Donations to eligible charitable institutions are also deductible from taxable income of the
donor. All the Industrial Big wigs have formed its own charitable trust, to channelize their

31
Frank Mokosak, Advantages and disadvantages of Trust, Des Moines Register, (Sep.06, 2018, 3:32 PM),
https://www.desmoinesregister.com/story/money/2014/03/31/advantages-disadvantages-trusts/7141729/
32
Ibid
33
Trust-An Overview, IA Associates, (Sep.06, 2018, 3:48 PM), http://www.rna-cs.com/trust-an-overview-2/

16
donations for public benevolence through that trust, which remains under their own control.
This enables them to apply the donations in a regulated manner according to their own
discretion and still avail of the tax exemptions, both in respect of the donations made and also
the income of the trust.

A trust can also be formed for the welfare of family members and relatives dependent upon the
settlor. Besides, there is an ample scope of tax planning through private /family trusts. The
Institution of a trust enables the settlor to preserve his property from division and transfer to
outsiders.

The Trust will enable you to have a degree of control over the assets in the Trust after your
death, via the Trustees. After your death and before the estate has been settled the Trust can
provide a source of income for your dependent(s).34

4.2 DISADVANTAGES OF A TRUST

1. REREGISTRATION OF PROPERTY : In order to be included in a revocable trust, property
must be reregistered in the name of the trust. This may be burdensome and may involve other costs
such as filing fees. If any property has not been reregistered in the name of the trust at the time of
death its likely the estate will have to go through the probate process even though a revocable trust
was in place.

2. CREDITORS HAVE ACCESS TO CASH : A revocable trust may not shield you from creditors.
Your debts may be applied to the trust.35

3. COSTLY TO ESTABLISH : A revocable trust costs substantially more to establish than a Will
because you must fund the trust at the time you form it.

4. MAY NOT AUTOMATICALLY ADAPT TO CHANGED CIRCUMSTANCES In many

jurisdictions, Wills change automatically upon divorce, marriage or the birth of a child. Most
jurisdictions do not provide similar flexibility for revocable trusts.36

34
Advantages and Disadvantages of Trust, Johan Coetzee, (Sep.06, 2018, 4:14 PM),
https://www.jcat.co.za/NewsResources/NewsArticle.aspx?ArticleID=1529
35
Supra note 6
36
Ibid

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One of the most important factors to consider prior to setting up a revocable trust is selecting the right
attorney. It is essential that your trust is set up properly or it will not function as intended. Make sure
the attorney has experience specifically with revocable trusts, not simply estate planning, since that
usually means wills and probate. Also, you will want someone with whom you feel comfortable
discussing your personal and financial information.

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 5. CONCLUSION AND SUGGESTION

In the concept of a trust, the trustee becomes the legal owner but the element of legal ownership
is absent in the phenomenon of a security. The trustee although becomes the legal owner of the
trust property, yet he does not become the full owner thereof and cannot sell or otherwise
dispose pf the same contrary to the provisions of the trust deed. The trustee no doubt holds the
trust property for the benefit of the beneficiaries, but he does not hold it on their behalf. The
expression ‘on behalf of’ is not synonymous but conveys different meanings. In a trust of land,
the legal estate is in the trustee and the interest of the beneficiary or the cestui que trust is an
interest in the land called equitable interest. Therefore, what vests, in the trustee is only the
legal estate or the legal ownership. The trustee is not the full owner of the property in the real
sense of the term because there is a beneficial interest and the ownership therein carved out in
the property. The legal ownership vesting in the trustee is for the purpose of the trust and the
administration of the provisions of the trust. Because the beneficiary, until the trusts are carried
out, is entitled to deal with the property, the trustee is the person who is empowered to deal
with the same, but can only deal with it in accordance with the provisions of the deed of trust.

It is only for the provident administration of a particular charity that the trustees have the power
to sell the trust properties. Much will depend upon the provisions governing in a particular
trust. To allow trusts to make investment in shares and bonds of listed companies, government
has recently decided to announce a proposal to amend the Indian Trust Act, 1882. Trusts are
recognized under The Hague Convention.

At last we can conclude by stating that trust is a concept which revolves around three parties
i.e. the author, the trustee and the beneficiary/beneficiaries having respective rights and legal
obligations assigned to them by trust deed in relation to the trust property.

There are many advantages added to trust in terms of taxation, welfare of family members,
public benevolence and many others. Therefore, if all the requisite legal procedure is adopted
and trust is formed, then it is beneficial for each of them.

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 BIBLIOGRAPHY

 PRIMARY SOURCES
 BOOKS
o SubbaRao, G.C.V., Law of Transfer of Property, Vol.1 Ed.6 (ALT
Publications, 2009)
o Indian Trust Bare Act, 1882
 STATUTES
o Indian Trust Act, 1882

 SECONDARY SOURCES
 WEBSITES
o https://estate.findlaw.com/trusts/types-of-trusts.html
o http://www.legalhelplineindia.com/trust-laws-in-india/
o https://www.desmoinesregister.com/story/money/2014/03/31/advantages-
disadvantages-trusts/7141729/
o http://www.rna-cs.com/trust-an-overview-2/
o https://www.jcat.co.za/NewsResources/NewsArticle.aspx?ArticleID=1529

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