Trust - Purpose and Creation Under Indian Trust Act, 1882
Definition of a Trust:
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 owner, or declared and accepted by him, for the benefit of another, or of another and the owner.”
Purpose of creating a Trust:
Trusts are generally formed or created to fulfill any or more of the following objectives:
1.For discharge of the charitable and/or religious sentiments of the author of settlor of the trust, in a way that ensures public benefit;
2.For claiming exemption from Income tax U/s 10 or 11, as the case may be, in respect of incomes applied to charitable or religious purposes;
3.For the welfare of the members of the family and/or other relatives, who are dependent on the settlor of the trust;
4.For the proper management and preservation of a property;
5.For regulating the affairs of a provident fund, superannuation fund or gratuity fund or any other fund constituted by a person for the welfare of its employees.
How is trust Created?
Certain essentials for the creation of a trust are:
1. Express declaration by the author
2. The intention to create a trust
3. Purpose of the trust
4. Name of the trustee
5. Trust property
6. The beneficiaries
7. Transfer of trust property to trustees.
Who can create a Trust?
As per Section 7 of the Indian Trusts 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.
1.Trust by Hindu Undivided Family;
2.Trust by a Minor;
3.Trust by a Woman;
4.Association of Persons;
5.Company.
A trust can be created for myriad purposes like, for providing for the well-being of a minor, for religious or charitable purposes, for provision of medical aid to the author and so on. However, The Indian Trusts Act 1882 specifically states that a trust cannot be created for an unlawful purpose. A trust may be created by any person who is of sound mind, has attained the age of majority and is solvent. Any person capable of holding property may be appointed as a trustee. A person is not bound to accept responsibility as a trustee. He must declare his intention by words or actions. It is the duty of the trustee to fulfill the purpose of the trust.
Any person who is capable of holding property may be a beneficiary of a trust.A trust may be created of a movable property or an immovable property. In case, of immovable property it is necessary that the “trust instrument” be signed by the author or trustee and be registered unless the trust is created in the will of the author or trustee.A trust of movable property may be created in the above-mentioned manner by the execution of an instrument or by the transfer of ownership of the property to the trustee.
Ending a Trust:
A trust gets extinguished in the following cases:
1. Purpose is fulfilled
2. Purpose becomes unlawful
3. Fulfillment of purpose becomes impossible, for example by the destruction of trust property.
4. Trust is revoked, if it is revocable.
5. The purpose of a trust may be modified by the consent of all beneficiaries competent to contract.