Trust Act,1882

Assignment
The Trust Act,1882

Define Trust
An entity created to hold assets for the benefit of certain persons or
entities, with a trustee managing the trust (and often holding title on behalf of
the trust). Most trusts are founded by the persons (called trustors, settlors
and/or donors) who execute a written declaration of trust which establishes
the trust and spells out the terms and conditions upon which it will be
conducted. The declaration also names the original trustee or trustees,
successor trustees or means to choose future trustees. The assets of the trust
are usually given to the trust by the creators, although assets may be added by
others. During the life of the trust, profits and, sometimes, a portion of the
principal (called "corpus") may be distributed to the beneficiaries, and at some
time in the future (such as the death of the last trustor or settlor) the
remaining assets will be distributed to beneficiaries. A trust may take the place
of a will and avoid probate (management of an estate with court supervision) by
providing for distribution of all assets originally owned by the trustors or
settlors upon their death. There are numerous types of trusts, including
"revocable trusts" created to handle the trustors' assets (with the trustor acting
as initial trustee), often called a "living trust" or "inter vivos trust" which only
becomes irrevocable on the death of the first trustor; "irrevocable trust," which
cannot be changed at any time; "charitable remainder unitrust," which
provides for eventual guaranteed distribution of the corpus (assets) to charity,
thus gaining a substantial tax benefit. There are also court-decreed
"constructive" and "resulting" trusts over property held by someone for its
owner. A "testamentary trust" can be created by a will to manage assets given
to beneficiaries.
Object of Trust
The object of trust shall be to hold title to the trust property and to
protect and consenveit until its sale or other disposition or liquidation. The
trustee shall not undertake any activity not strictly necessary to the attainment
of the foregoingobjects and purpose , nor shall the trustee transact business
with in the meaning of applicable state law or any other than law, non shall
this agreement be deemed to be , or create or evidence the existence of a
corporation, De facto or dejune or a Massachusetts Trust, or any other type of
business trust, or an a ssociation in the nature of a corporation or a co
partnership or joint venture by or bwetween the trustee and the Beneficiaries ,
or by or between the Beneficiaries.

Classification of Trust
Classifying trust is a bit uneasy tasl and classification varies according to
classifires. A distinctive feature of classification of trust according to object.
Hence, most names of trusts are reflection of there peroses. Mainly a trust
classified in ways;

• By act of parties
• By operation of law

By act of parties also divided into two types

1) Express Trust
2) Implied Trust

By operation of law also divided into two ways

I. Resulting trust
II. Constractive trust

Express Trust also divided into four ways

 Executive Trust
 Private Trust
 Public Trust
 Executory Trust

Elements/Subject matter of a valid trust

Subject matter of a valid trust are>

a) A settlor who creates the trust.

b) One or more trustees who administer and manage the trust
c) One or more beneficiaries who receive the benefits and enforce the trust
d) Real or personal property that must be transferred to trust

The certainties to create a trust

Subject to the provisions of section 5, a trust is created when the author of the
trust indicates with reasonable certainty by any words or acts (a) an intention
on his part to create thereby a trust,

(b) the purpose of the trust,

(c) the beneficiary, and

(d) the trustproperty, 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.

Illustrations

(a) A bequeaths certain property to B, ―having the fullest confidence that he

will dispose of it for the benefit of C‖. This creates a trust so far as regards A
and C.

(b) A bequeaths certain property to B, ―hoping he will continue it in the

family‖. This does not create a trust, as the beneficiary is not indicated with
reasonable certainty.

(c) A bequeaths certain property to B, requesting him to distribute it among

such members of C's family as B should think most deserving. This does not
create a trust, for the beneficiaries are not indicated with reasonable certainty.

(d) A bequeaths certain property to B, desiring him to divide the bulk of it

among C's children. This does not create a trust, for the trust-property is not
indicated with sufficient certainty.

(e) A bequeaths a shop and stock-in-trade to B, on condition that he pays

A's debts and a legacy to C. This is a condition, not a trust for A's creditors and
C.
Who can create a trust
A trust may be created-

(a) by every person competent to contract, and,

(b) with the permission of a principal Civil Court of original jurisdiction, by or

on behalf of a
minor;

but subject in each case to the law for the time being in force as to the
circumstances and

extent in and to which the author of the trust may dispose of the trust –
property.

What are the reason for abolishing a trust

Section 77: Trust extinguished-

a. When its purpose is completely fulfilled

b. When its purpose becomes unlawful
c. When the fulfillment of its purpose becomes impossible by derstruction
of the trust property or otherwise
d. When the trust, being revocable is expressly revoked

The rights,responsibilities and power of a trustee

Rights:

1. The right for reimbursement

If you are a trustee and have had to incur some costs and expenses in the
proper administration of the trust, you have the right to be reimbursed. This
burden must be equally distributed amongst the beneficiaries. You can also
have recourse to the trust property. It‘s worth noting in regards to this right
that:

The indemnity must be reasonable and must have properly incurred in the
course of your duties as trustee;
If you are sued in your capacity as a trustee, you can claim your conduct as an
incident of administration and you can be reimbursed for your legal fees

You have the right to pursue the beneficiaries personally for reimbursement for
costs and expenses.

2. The right to seek advice from the court

As a trustee, you most likely have the statutory right to seek help from the
court on the proper administration of the court, except in the Northern
Territory and Tasmania. In these cases, the role of the court is to determine for
the trustee what should happen to protect and maintain the best interests of
the trust.

3. The right to be relieved from a breach of trust

In all Trustee Acts in Australia, they empower the court to relieve you as a
trustee from liability for breaches of a trust only if you acted reasonably,
honestly and you ought fairly to be excused. An example is section 85 of the
Trustee Act 1925 (NSW).The onus of proof lies on you as trustee, and you‘ll
need to satisfy the court that you acted:

In good faith and for the welfare of the trust;

Acted in the best interest for the trust and not for your own or any other
trustee‘s interest; and

That your acquittal not only grants you as trustee relief but also the
beneficiaries.

4. The right to a contribution claim

If you as a trustee incur losses due to breach of trust, you can hold all
cotrustees jointly and severally liable to help recuperate the costs. You can
exercise this right even if you are solely responsible for the loss, as the court
holds the opinion that even if you are a passive trustee, your inactivity has
permitted the culpable trustee to breach the trust.

If you are an innocent trustee who has acted reasonably and have had a
contribution claim made against you, you may be entitled to an indemnity if
the defaulting trustee has kept trust property or has personally benefited from
the breach.

Responsible:

1. Duty of loyalty

Trustees have a fiduciary duty towards beneficiaries. A trustee must administer

the trust solely in the interest of the trust beneficiaries and cannot place his or
her interest in conflict with beneficiaries. Trustees should not profit personally
from their role as trustees other than a fee which they may receive for their
trusteeship

2. Duty to manage the trust efficiently

To manage a trust efficiently, a trustee must be very familiar with the terms of
the trust, the trust‘s assets and liabilities, the circumstances of the
beneficiaries and the purpose of the trust. Effective management systems
should be in place to ensure that the appropriate decisions are made in a
timely manner and taking into account the terms of the trust and the interests
of the beneficiaries.

3. Duty to act personally

Trustees act personally and must be involved in decision-making in respect of a

trust. While trustees are typically permitted to engage advisers such as lawyers
and financial advisers, the final decision on trust matters should be made by
the trustee. In certain circumstances, trustees may delegate powers to third
parties by power of attorney or deed of delegation.

4. Duty to consider the beneficiaries

A trustee must act impartially with respect to the beneficiaries by considering

all beneficiaries in their decision making. They should also not follow the
instructions of the settlor but may give consideration to the wishes of the
settlor which are not binding unless included in the terms of the trust

5. Duty to account

Unless otherwise provided by a trust, a trustee must keep trust accounts and
other records. They must also respect beneficiaries‘ rights with regard to
requests for trust information.
Powers:
The precise powers that a trustee has will be defined by the trust deed and by
law. However, a trustee will normally be given the following powers:

 investment;
 dealing with land;
 delegation to agents, nominees and custodians;  insurance;
 remuneration for professional trustees;
 advancement of capital;
 maintenance of minor beneficiaries;
 to pay, transfer or lend funds to beneficiaries.

All the powers of a trustee are ‗fiduciary‘, which means that they must be
exercised as follows:

 in the best interests of all the beneficiaries;

 only for the benefit of the beneficiaries and not for third parties;
 not for the trustees‘ benefit, unless specifically authorised;
 not to defeat the terms of the trust, but in compliance with them and in
consideration of all other relevant circumstances

Reason to remove a trustee from his office

The judge will remove a trustee only if he or she hears the proper evidence. You
must provide the judge evidence in the form of documents and testimony.The
reason to remove a trustee are given below:

 Friction Between Co-Trustees.

 Failure to Comply with Trust Terms.
 Non-Cooperation With a Vital Party.
 Neglecting, Mismanaging Trust Assets.
 Misconduct.
 Self-Dealing.
 Abuse of Discretion.
 Misappropriation of Funds.
 Hostility Towards Beneficiaries.
 Breach of Fiduciary Duty/Breach of Trust.
  The Trustee is insolvent or otherwise unfit.
 Trustee Incapacity.
 Trustee‘s Failure to Act.
 Excessive Trustee Fees and Expenses.
 Trustee Being Under Undue Influence.
 Conflict of Interest.

Rights and Responsibilities of a beneficiaries

Rights of beneficiaries

According to the trust act 1882 there are some rights of a benificiaries:

I. Right to rents and profits

II. Right to specific execution
III. Right to transfer beneficial interest
IV. Right toinspect and take copies of instrument of trust accounts V.
Right to sue for execution of trust
VI. Right to proper trustees
VII. Compel of any act of duty

Responsibilities of a beneficiaries

a) Join in committing breach of trust

b) Knowing obtains any advantages therefrom without the consent of the
other beneficiaries
c) Becomes aware of a breach of trust committed or intended to be
commited and actually cancels ir
d) The after beneficiaries are intitled to have all his beneficial interest
impound as against him and all who claim under him until the loss
caused by the breach has been companseted.

Doctrine of Cypress
Doctrine of Cypress is a legal concept that gives courts the power to interpret
the terms of a will, gift, or charitable trust. This doctrine will become active if
the intended wishes or conditions of the original document cannot be carried
out, be legitimately interpreted literally, or legally performed. Cy pres gives the
court the flexibility to understand the perceived intent of the donor or testator
and implement their wishes.
The term has its origin is an old French phrase, cy pres comme possible which,
in translation, means "as near as possible." Cy pres allows the wishes of the
creator of a charitable trust, gift, or will to be carried out in many cases. If it
were not for this power, there would be instances in which the phrasing in the
document would make it null and void, legally, and thus impossible to
implement.

1.1The Latin word cypress means for a purpose resembling ―as nearly as
possible‖ the purpose originally proposed. It means approximation. Cypress is a
doctrine evolved in English in relation to charitable trusts whereby , if a gift is
clearly for charitable purpose only, it will not allowed to fail because the precise
object to be benefited, or the mode of application of the fund is uncertain.
When a charitable trust can not be executed due to some short coming or for
insufficient of the sub-matter the trust shall not be void, rather it shall be
executed as nearly as possible.

2. If the conditions are satisfied the court will settle a scheme for the
application of the found to another purpose as near as possible to the
prescribed trustier. • >References: Walker the oxford companion to Law 1980,
p.329,from L .Sheridan and V.Delany, the cypress Doctrine.
3.Where there is a surplus of funds often the specified charitable object has
been carried out, the same will be applied cypress provided a paramount
intention of charity appears. A court has no authority to sanction any deviation
from the donors expressed intention so for as it can be given effect. Similarly,
because the court considers the application of the trust property or its income
to another purpose which would be more expedient or beneficial, it has no
authority to do so

What is charitable trust? Private trust vs Charitable

trust

Charitable trust

A charitable trust is an irrevocable trust established for charitable purposes

and, in some jurisdictions, a more specific term than "charitable organization".
A charitable trust enjoys a varying degree of tax benefits in most countries.
Trust created for advancement of education, promotion of public health and
comfort, relief of poverty, furtherance of religion, or any other purpose regarded
as charitable in law. Benevolent and philanthropic purposes are not
necessarily charitable unless they are solely and exclusively for the benefit of
public or a class or section of it. Charitable trusts (unlike private or
noncharitable trust) can have perpetual existence and are not subject to laws
against perpetuity. They are wholly or partially exempt from almost all taxes.
Where the purpose of a charitable trust becomes impossible or unpractical to
carry out then, under the legal doctrine of cy près (French for, as near as), the
trustees acting by a majority or a court may choose another charitable purpose
as nearly like the original purpose as possible.

Private trust vs Charitable trust

As a general rule a charitable trust may last forever unlike a private trust. In a
private trust, the designed beneficiary is the person to enforce the trust.

In a charitable trust, the state attorney general , who rpresents the public
interest is the person to enforce the trust.

Private trust is a trust created for the benefit of individuals ither than a public
or charitable purpose.It is created for the financial benefit or one or more
desigrated beneficiaries rather than for the public benefit.

A charitable trust is an irrevocable trust established for charitable purpose and

in some jurisdictions, anone specific term than charitable organization.

Doctrine of severability
This doctrine of severability is also known as the doctrine of separability. The
word ―to the extent of the inconsistency or contravention‖ makes it clear that
when some of the provision of a statue when some of the provisions of a statute
becomes unconstitutional on account of inconsistency with fundamental
rights, only to the repugnant provision of the law in question shall be treated
by the courts as void, and not the whole statute. The doctrine of severability
means that when some particular provision of a statute offends or is against a
constitutional limitation, but that provision is severable from the rest of the
statute, only that offending provision will be declared void by the Court and not
the entire statute.

The doctrine of severability says that if good and bad provisions are joined
together by using the word ‗and‘ or ‗or‘ and the enforcement of good provision
is not made dependent on the enforcement of the bad one that is the good
provision can be enforced even if the bad one cannot or had not existed, the
two provisions are severable and the good one will be upheld as valid and given
effect to. On the other hand, if there is one provision which is capable of being
used for a legal purpose as well as for illegal one, it is invalid and cannot be
allowed to be used even for the legal purpose.

In this doctrine it is not the whole act which is held invalid for being
inconsistent with the Part three of the constitution which is given to the
citizens of India. It is only those parts are inconsistent which are violative of
the fundamental rights. But just the part which violates the fundamental rights
is separable from that which does not isolate them. If it there that the valid
portion is combined with the invalid portion that it is impossible to separate
them. Then in such cases the court will leave it and declare the whole Act as
void. This process of doing it is known as the doctrine of severability.

Trust vs Bailment, Trust vs Contract

Trust vs Bailment
1) Bailment was recognized at common law and consequently the rights and
obligations of bailee are legal, whereas a trust is merely equitable, the
trustees having equitable rights
2) Only personal chattels can be bailed,while any property may be held in
trust.
3) A bailee has only a special property in the bailment, the bailon keeping
general property in the trust with himself. In other words a bailon gives to
the bailee only a limited or special property for the time being, while a
trustee is the full legal owner , subject to obligations attached to the
property in trust with him.
4) Only a bailon can enforce the duties of bailce, an obligation under a trust
can be enforced by anyone entitled to its benefits.
5) A bailon uses his special rights for hisn own benefit but a trustee is bound
to exercise them on behalf of and for the benefit of another.

Trust vs Contract

I. A trust is a type of contract

II. Trust is fundamental which helps devlop a contract.
III. If there is no trust there will be no promise, and if there is no promise
then there will be no contract
IV. Trust is root of the contract tree
V. A trust is dedicated fund created for the benefit of a designated recipient
on the other gand, a contract is a legally binding agreement between two
individuals on entities, in which each exchanges promises to give
something of value to the other.
VI. In a trust there are always at least three people or a third party to a
beneficiary of something that the third party to a beneficiary of
something that the third party will hold the assets of the beneficiary in a
trust .Contract is always involves at least two people.
Remedies for breach of a trust
Remedies are avail able to guard against breach of trust.These can be divided
to two :

I. Personal remedies against trustee

II. Propriety remedies available to the beneficiaries.

Personal remedies against trusee;it can be divided to three:

a) Measure of liability
b) Investments
c) Interest

Properietary remedies:
A kind of remedy where the plaintiff can demand that property in the hands of
the defendant is to be treated as that of plaintiff.It is not he same as real
remedy.If the conditions are satisfied the court will settle a scheme for the
application of the found to another purpose as near as possible to the
prescribed trustier.