CHANAKYA NATIONAL LAW UNIVERSITY

NYAYA NAGAR,MITHAPUR,PATNA-800001

MARCH 2018
RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULLFILMENT OF COURSE

PROPERTY LAW
TRUSTS AND FIDUCIARY POSITION
 DECLARATION

I hereby declare that the project entitled “TRUSTS AND FIDUCIARY POSITION”
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.V.K.VIMAL.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.
 ACKNOWLEDGEMENT

It is a fact that any research work prepared, compiled or formulated in isolation is inexplicable to
an extent. This research work, although prepared by me, is a culmination of efforts of a lot of
people who remained in veil, who gave their intense support and helped me in the completion of
this project.

Firstly, I am very grateful to my subject teacher Dr.V.K.VIMAL sir, without the kind support
and help of whom the completion of this project was a herculean task for me. He donated his
valuable time from his busy schedule to help me to complete this project. I would like to thank
him for his valuable suggestions towards the making of this project.

I am highly indebted to my parents and friends for their kind co-operation and encouragement
which helped me in completion of this project. I am also thankful to the library staff of my
college which assisted me in acquiring the sources necessary for the compilation of my project.

Last but not the least, I would like to thank the Almighty who kept me mentally strong and in
good health to concentrate on my project and to complete it in time.

I thank all of them !

----

RAJ SHEKHAR

ROLL NO.:-1958

B.A.LL.B(HONS.)
 TABLE OF CONTENTS

1.Introduction-----------------------------------------------------------

2.Concept of trust------------------------------------------------------

3.Concept of fiduciary-------------------------------------------------

4.Concept of fiduciary position---------------------------------------

5.Fiduciary duties-------------------------------------------------------

6.Conclusion-------------------------------------------------------------

Bibliography-----------------------------------------------------------
 INTRODUCTION

A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the

trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

Trusts are established to provide legal protection for the trustor’s assets, to make sure those

assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork

and, in some cases, avoid or reduce inheritance or estate taxes. In finance, a trust can also be a

type of closed-end fund built as a public limited company. Trusts are created by settlors (an

individual along with his or her lawyer) who decide how to transfer parts or all of their assets

to trustees. These trustees hold on to the assets for the beneficiaries of the trust. The rules of a

trust depend on the terms on which it was built. In some areas, it is possible for older

beneficiaries to become trustees. For example, in some jurisdictions, the grantor can be a

lifetime beneficiary and a trustee at the same time.1

A trust can be used to determine how a person’s money should be managed and distributed while

that person is alive, or after their death.2 A trust helps avoid taxes and probate. It can protect

assets from creditors, and it can dictate the terms of an inheritance for beneficiaries. The

disadvantages of trusts are that they require time and money to create, and they cannot be easily

revoked.

1
https://blog.ipleaders.in/trusts(visited on 11/03/19)

2
http://www.legalservicesindia.com/article/1630/(visited on 11/03/19)
A trust is one way to provide for a beneficiary who is underage or has a mental disability that

may impair his ability to manage finances. Once the beneficiary is deemed capable of managing

his assets, he will receive possession of the trust.

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more

other parties (person or group of persons). Typically, a fiduciary prudently takes care of money

or other assets for another person. One party, for example, a corporate trust company or the trust

department of a bank, acts in a fiduciary capacity to another party, who, for example, has

entrusted funds to the fiduciary for safekeeping or investment3. Likewise, asset managers,

including managers of pension plans, endowments, and other tax-exempt assets, are considered

fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in a

position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another

whose aid, advice, or protection is sought in some matter. In such a relation good conscience

requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.

Fiduciary duties in a financial sense exist to ensure that those who manage other people’s money

act in their beneficiaries' interests, rather than serving their own interests. The Fiduciary Duty in

the 21st Century programme finds that, "far from being a barrier, there are positive duties to

integrate environmental, social and governance (ESG) factors in investment processes." The

programme also concludes that “integrating ESG issues into investment research and processes

will enable investors to make better investment decisions and improve investment performance

consistent with their fiduciary duties.” See section 'fiduciary duty and pension governance'.

3
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 AIMS AND OBJECTIVE

1.The researcher intends to throw some light on the concept of trusts.

2.The researcher intends to throw some light on the concept of fiduciary position.

3.The researcher intends to highlight the nexus between trust and fiduciary.

HYPOTHESIS

The researcher assumes that A trust is a fiduciary relationship in which trustor gives the trustee,
the right to hold title to property or assets for the benefit of the beneficiary.

RESEARCH METHODOLOGY

The research is based on only doctrinal research methodology.

SOURCES OF DATA

The researcher used both primary as well as secondary sources to complete this project.
 LIMITATION OF STUDY

The researcher can not opt for non-doctrinal method of research due to nature of the project and
hence he has to dependant only upon doctrinal method of study where library reference is utmost
requisite and shall include primary as well as secondary sources.

MODE OF CITATION

The researcher have followed a uniform mode of citation throughout the course of this project.
 2.CONCEPT OF TRUSTS

A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the
trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
Trusts are established to provide legal protection for the trustor’s assets, to make sure those
assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork
and, in some cases, avoid or reduce inheritance or estate taxes. In finance, a trust can also be a
type of closed-end fund built as a public limited company. Trusts are created by settlors (an
individual along with his or her lawyer) who decide how to transfer parts or all of their assets
to trustees. These trustees hold on to the assets for the beneficiaries of the trust. The rules of a
trust depend on the terms on which it was built. In some areas, it is possible for older
beneficiaries to become trustees. For example, in some jurisdictions, the grantor can be a
lifetime beneficiary and a trustee at the same time.4

A trust can be used to determine how a person’s money should be managed and distributed while
that person is alive, or after their death. A trust helps avoid taxes and probate. It can protect
assets from creditors, and it can dictate the terms of an inheritance for beneficiaries. The
disadvantages of trusts are that they require time and money to create, and they cannot be easily
revoked.

A trust is one way to provide for a beneficiary who is underage or has a mental disability that
may impair his ability to manage finances. Once the beneficiary is deemed capable of managing
his assets, he will receive possession of the trust.

Categories of Trusts
There are many different types of trusts, each fits into one or more of the following categories:

Living or Testamentary

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A living trust – also called an inter-vivos trust – is a written document in which an individual's
assets are provided as a trust for the individual's use and benefit during his lifetime. These assets
are transferred to his beneficiaries at the time of the individual's death. The individual has a
successor trustee who is in charge of transferring the assets.

A testamentary trust, also called a will trust, specifies how the assets of an individual are
designated after the individual's death.

Revocable or Irrevocable

A revocable trust can be changed or terminated by the trustor during his lifetime. An irrevocable
trust, as the name implies, is one the trustor cannot change once it's established, or one that
becomes irrevocable upon his death.

Living trusts can be revocable or irrevocable. Testamentary trusts can only be irrevocable. An
irrevocable trust is usually more desirable. The fact that it is unalterable, containing assets that
have been permanently moved out of the trustor's possession, is what allows estate taxes to be
minimized or avoided altogether.5

Funded or Unfunded

A funded trust has assets put into it by the trustor during his lifetime. An unfunded trust consists
only of the trust agreement with no funding. Unfunded trusts can become funded upon the
trustor’s death or remain unfunded. Since an unfunded trust exposes assets to many of the perils
a trust is designed to avoid, ensuring proper funding is important.

Common Purposes for Trusts

The trust fund is an ancient instrument – dating back to feudal times, in fact – that is sometimes
greeted with scorn, due to its association with the idle rich (as in the pejorative "trust fund
baby"). But trusts are highly versatile vehicles that can protect assets and direct them into the
right hands in the present and in the future, long after the original asset owner's death.

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A trust is a legal entity employed to hold property, so the assets are generally safer than they
would be with a family member. Even a relative with the best of intentions could face a lawsuit,
divorce or other misfortune, putting those assets at risk.

Though they seem geared primarily toward high net worth individuals and families, since they
can be expensive to establish and maintain, those of more middle-class means may also find
them useful – in ensuring care for a physically or mentally deficient dependent, for example.

Some individuals use trusts simply for privacy. The terms of a will may be public in some
jurisdictions. The same conditions of a will may apply through a trust, and individuals who don't
want their wills publicly posted opt for trusts instead.

Trusts can also be used for estate planning. Typically, the assets of a deceased individual are
passed to the spouse and then equally divided to the surviving children. However, children who
are under the legal age of 18 need to have trustees. The trustees only have control over the assets
until the children reach adulthood.6

Trusts can also be used for tax planning. In some cases, the tax consequences provided by using
trusts are lower compared to other alternatives. As such, the usage of trusts has become a staple
in tax planning for individuals and corporations.

Assets in a trust benefit from a step-up in basis, which can mean a substantial tax savings for the
heirs who eventually inherit from the trust. By contrast, assets that are simply given away during
the owner’s lifetime typically carry his or her original cost basis.

Here's how the calculation works: Shares of stock that cost $5,000 when originally purchased,
and that are worth $10,000 when the beneficiary of a trust inherits them, would have a basis of
$10,000. Had the same beneficiary received them as a gift when the original owner was still
alive, their basis would be $5,000. Later, if the shares were sold for $12,000, the person who
inherited them from a trust would owe tax on a $2,000 gain, while someone who was given the
shares would owe tax on a gain of $7,000. (Note that the step-up in basis applies to inherited
assets in general, not just those that involve a trust.)

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Finally, a person may create a trust to qualify for Medicaid and still preserve at least a portion of
their wealth.

CONCEPT OF FIDUCIARY

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more

other parties (person or group of persons). Typically, a fiduciary prudently takes care of money

or other assets for another person. One party, for example, a corporate trust company or the trust

department of a bank, acts in a fiduciary capacity to another party, who, for example, has

entrusted funds to the fiduciary for safekeeping or investment. Likewise, asset managers,

including managers of pension plans, endowments, and other tax-exempt assets, are considered

fiduciaries under applicable statutes and laws.In a fiduciary relationship, one person, in a

position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another

whose aid, advice, or protection is sought in some matter. In such a relation good conscience

requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.7

A fiduciary will be liable to account if proven to have acquired a profit, benefit or gain from the

relationship by one of three means:

 In circumstances of conflict of duty and interest;

 In circumstances of conflict of duty to one person and duty to another person;

 By taking advantage of the fiduciary position.

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Therefore, it is said the fiduciary has a duty not to be in a situation where personal interests and

fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with

another fiduciary duty, and not to profit from his fiduciary position without express knowledge

and consent. A fiduciary cannot have a conflict of interest.8

The state of Texas in the United States sets out the duties of a fiduciary in its Estates Code,

chapter 751, as follows

Sec. 751.101. Fiduciary Duties.

An attorney in fact or agent is a fiduciary and has a duty to inform and to account for

actions taken under the power of attorney.

Sec. 751.102. Duty to Timely Inform Principal.

(a) The attorney in fact or agent shall timely inform the principal of each action taken

under the power of attorney.

(b) Failure of an attorney in fact or agent to timely inform, as to third parties, does not

invalidate any action of the attorney in fact or agent.

Sec. 751.103. Maintenance of Records.

(a) The attorney in fact or agent shall maintain records of each action taken or decision

made by the attorney in fact or agent.

(b) The attorney in fact or agent shall maintain all records until delivered to the principal,

released by the principal, or discharged by a court.

Sec. 751.104. Accounting.

(a) The principal may demand an accounting by the attorney in fact or agent.

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(b) Unless otherwise directed by the principal, an accounting under Subsection (a) must

include:

(1) the property belonging to the principal that has come to the attorney in fact’s or

agent’s knowledge or into the attorney in fact’s or agent’s possession;

(2) each action taken or decision made by the attorney in fact or agent;

(3) a complete account of receipts, disbursements, and other actions of the attorney in fact

or agent that includes the source and nature of each receipt, disbursement, or action, with

receipts of principal and income shown separately;

(4) a listing of all property over which the attorney in fact or agent has exercised control

that includes:

(A) an adequate description of each asset; and

(B) the asset’s current value, if the value is known to the attorney in fact or agent;

(5) the cash balance on hand and the name and location of the depository at which the

cash balanceis kept;

(6) each known liability; and

(7) any other information and facts known to the attorney in fact or agent as necessary for

a full and definite understanding of the exact condition of the property belonging to the

principal.

(c) Unless directed otherwise by the principal, the attorney in fact or agent shall also

provide to the principal all documentation regarding the principal’s property.

 CONCEPT OF FIDUCIARY POSITION

An essential aspect of the nature of trusteeship is that a trustee stands in a fiduciary relationship
to the beneficiaries of the trust, which means that he must not allow any conflict between his
own interests and the interests of the beneficiary, and that he must not make any unauthorized
profit for himself from his position as trustee. This chapter examines the nature and extent of
fiduciary duties. It discusses the fiduciary relationship; unauthorized remuneration; purchase of
trust property by trustees; incidental profits; liability for breach of fiduciary duty; remedies
where a fiduciary makes an unauthorized profit; and defences to an action for breach of fiduciary
duty.9

The most common circumstance where a fiduciary duty will arise is between a trustee, whether
real or juristic, and a beneficiary. The trustee to whom property is legally committed is the
legal—i.e., common law—owner of all such property. The beneficiary, at law, has no legal title
to the trust; however, the trustee is bound by equity to suppress their own interests and
administer the property only for the benefit of the beneficiary. In this way, the beneficiary
obtains the use of property without being its technical owner.

Others, such as corporate directors, may be held to a fiduciary duty similar in some respects to
that of a trustee. This happens when, for example, the directors of a bank are trustees for the
depositors, the directors of a corporation are trustees for the stockholders or a guardian is trustee
of their ward's property. A person in a sensitive position sometimes protects themselves from
possible conflict of interest charges by setting up a blind trust, placing their financial affairs in
the hands of a fiduciary and giving up all right to know about or intervene in their handling.

The fiduciary functions of trusts and agencies are commonly performed by a trust company, such
as a commercial bank, organized for that purpose. In the United States, the Office of the
Comptroller of the Currency (OCC), an agency of the United States Department of the Treasury,
is the primary regulator of the fiduciary activities of federal savings associations.

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When a court desires to hold the offending party to a transaction responsible so as to prevent
unjust enrichment, the judge can declare that a fiduciary relation exists between the parties, as
though the offender were in fact a trustee for the partner.

Relationships which routinely attract by law a fiduciary duty between certain classes of persons
include these:

 Trustee/beneficiary
 Conservators and legal guardians / wards
 Agents, attorney in fact usually from written grant of authority by
principal, brokers and factors / principals
 Buyer agent (real estate broker) / buyer client
 Confidential advisor including financial adviser and investment advisor / advisee or client
 Lawyer/client, A solicitor is presumed to have a fiduciary duty.
 Executors and administrators / legatees and heirs;
 Corporate partners, joint venturers, directors and officers / company and stockholders
 Board of directors / company
 Partner/partner
 Senior employee / company
 Retirement plan administrators (including 401(k) plans) / retirees and workers;
 Retirement account advisors;
 Promoters / stock subscribers;
 Liquidator/company;
 Mutual savings banks and investment corporations / their depositors and investors;
 Receivers, trustees in bankruptcy and assignees in insolvency / creditors
 Governments / indigenous peoples, Seminole Nation v. United States
 Doctor/patient - in Canada, not in Australia
 Guardian/ward
 Teacher/student;
 Priest / parishioner seeking counseling;

In Australia, it must be noted that the categories of fiduciary relationships are not closed.[2][9]
Roman and civil law recognized a type of contract called fiducia (also contractus fiduciae or
fiduciary contract), involving essentially a sale to a person coupled with an agreement that the
purchaser should sell the property back upon the fulfillment of certain conditions. [53] Such
contracts were used in the emancipation of children, in connection with testamentary gifts and in
pledges. Under Roman law a woman could arrange a fictitious sale called a fiduciary
coemption in order to change her guardian or gain legal capacity to make a will.[54]

In Roman Dutch law, a fiduciary heir may receive property subject to passing it to another on
fulfilment of certain conditions; the gift is called a fideicommissum. The fiduciary of a
fideicommissum is a fideicommissioner and one that receives property from a fiduciary heir is
a fideicommissary heir. 10

Fiduciary principles may be applied in a variety of legal contexts.

Possible relationships

Joint ventures, as opposed to business partnerships, are not presumed to carry a fiduciary duty;
however, this is a matter of degree. If a joint venture is conducted at commercial arm's length
and both parties are on an equal footing then the courts will be reluctant to find a fiduciary duty,
but if the joint venture is carried out more in the manner of a partnership then fiduciary
relationships can and often will arise.

Husbands and wives are not presumed to be in a fiduciary relationship; however, this may be
easily established. Similarly, ordinary commercial transactions in themselves are
not presumed to but can give rise to fiduciary duties, should the appropriate circumstances arise.
These are usually circumstances where the contract specifies a degree of trust and loyalty or it
can be inferred by the court.

Australian courts also do not recognise parents and their children to be in fiduciary
relationships. In contrast, the Supreme Court of Canada allowed a child to sue her father for
damages for breach of his fiduciary duties, opening the door in Canada for allowing fiduciary
obligations between parent and child to be recognised.

Australian courts have also not accepted doctor-patient relationships as fiduciary in nature.
In Breen v Williams, the High Court viewed the doctor's responsibilities over their patients as

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lacking the representative capacity of the trustee in fiduciary relationships. Moreover, the
existence of remedies in contract and tort made the Court reluctant in recognising the fiduciary
relationship.

Recently, in an insider trading case, the U.S. Securities and Exchange Commission brought
charges against a boyfriend of a Disney intern, alleging he had a fiduciary duty to his girlfriend
and breached it. The boyfriend, Toby Scammell, allegedly received and used insider information
on Disney's takeover of Marvel Comics. 11

Generally, the employment relationship is not regarded as fiduciary, but may be so if within a
particular contractual relationship there are specific contractual obligations which the employee
has undertaken which have placed him in a situation where equity imposes these rigorous duties
in addition to the contractual obligations. Although terminologies like duty of good faith, or
loyalty, or the mutual duty of trust and confidence are frequently used to describe employment
relationships, such concepts usually denote situations where "a party merely has to take into
consideration the interests of another, but does not have to act in the interests of that other.[67]

If fiduciary relationships are to arise between employers and employees, it is necessary to

ascertain that the employee has placed himself in a position where he must act solely in the
interests of his employer. In the case of Canadian Aero Service Ltd v O'Malley, it was held that a
senior employee is much more likely to be found to owe fiduciary duties towards his employer.

A protector of a trust may owe fiduciary duties to the beneficiaries, although there is no case
law establishing this to be the case.

In 2015, the United States Department of Labor issued a proposed rule that if finalized would
extend the fiduciary duty relationship to investment advisory and some brokers including
insurance brokers. In 2017, the Trump Administration planned to order a 180-delay of
implementation of the rule, sometimes known as the 'fiduciary rule'. The rule would require
"brokers offering retirement investment advice to put their clients' interest first." the Trump
Administration later rescinded the fiduciary rule on July 20, 2018. Prior to its repeal, the rule was
also dealt blows by the US Fifth Circuit Court of Appeals in March and June 2018.

Example

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Two members of a band currently under contract with one another (or with some other tangible,
existing relationship that creates a legal duty), X and Y, record songs together. Let us imagine it
is a serious, successful band and that a court would declare that the two members are equal
partners in a business. One day, X takes some demos made cooperatively by the duo to a
recording label, where an executive expresses interest. X pretends it is all his work and receives
an exclusive contract and $50,000. Y is unaware of the encounter until reading it in the paper the
next week.12

This situation represents a conflict of interest and duty. Both X and Y hold fiduciary duties to
each other, which means they must subdue their own interests in favor of the duo's collective
interest. By signing an individual contract and taking all the money, X has put personal interest
above the fiduciary duty. Therefore, a court will find that X has breached his fiduciary duty.
The judicial remedy here will be that X holds both the contract and the money in a constructive
trust for the duo. Note, X will not be punished or totally denied of the benefit; both X and Y will
receive a half share in the contract and the money.

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 FIDUCIARY DUTIES

Fiduciary duties in a financial sense exist to ensure that those who manage other people’s money

act in their beneficiaries' interests, rather than serving their own interests. The Fiduciary Duty in

the 21st Century programme finds that, "far from being a barrier, there are positive duties to

integrate environmental, social and governance (ESG) factors in investment processes." The

programme also concludes that “integrating ESG issues into investment research and processes

will enable investors to make better investment decisions and improve investment performance

consistent with their fiduciary duties.” See section 'fiduciary duty and pension governance'.

A fiduciary duty is the highest standard of care in equity or law. A fiduciary is expected to be

extremely loyal to the person to whom he owes the duty (the "principal") such that there must be

no conflict of duty between fiduciary and principal, and the fiduciary must not profit from his

position as a fiduciary (unless the principal consents). The nature of fiduciary obligations differs

among jurisdictions. In Australia, only proscriptive or negative fiduciary obligations are

recognised, whereas in Canada fiduciaries can come under both proscriptive (negative) and

prescriptive (positive) fiduciary obligations. 13

In English common law, the fiduciary relation is an important concept within a part of the legal

system known as equity. In the United Kingdom, the Judicature Acts merged the courts of

equity (historically based in England's Court of Chancery) with the courts of common law, and

as a result the concept of fiduciary duty also became applicable in common lawcourts.

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When a fiduciary duty is imposed, equity requires a different, stricter standard of behavior than

the comparable tortious duty of care in common law. The fiduciary has a duty not to be in a

situation where personal interests and fiduciary duty conflict, not to be in a situation where his

fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary

position without knowledge and consent. A fiduciary ideally would not have a conflict of

interest. It has been said that fiduciaries must conduct themselves "at a level higher than that

trodden by the crowd" and that "the distinguishing or overriding duty of a fiduciary is the

obligation of undivided loyalty14

The duty of care requires control persons to act on an informed basis after due consideration of

all information. The duty includes a requirement that such persons reasonably inform themselves

of alternatives. In doing so, they may rely on employees and other advisers so long as they do so

with a critical eye and do not unquestionably accept the information and conclusions provided to

them. Under normal circumstances, their actions are accorded the protection of the business

judgment rule, which presumes that control persons acted properly, provided that they act on an

informed basis, in good faith and in the honest belief that the action taken was in the best

interests of the company.

The duty of loyalty requires control persons to look to the interests of the company and its other

owners and not to their personal interests. In general, they cannot use their positions of trust,

confidence and inside knowledge to further their own private interests or approve an action that

will provide them with a personal benefit (such as continued employment) that does not

primarily benefit the company or its other owners.

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The duty of good faith requires control persons to exercise care and prudence in making business

decisions—that is, the care that a reasonably prudent person in a similar position would use

under similar circumstances. Control persons fail to act in good faith, even if their actions are not

illegal, when they take actions for improper purposes or, in certain circumstances, when their

actions have grossly inequitable results. The duty to act in good faith is an obligation not only to

make decisions free from self-interest, but also free of any interest that diverts the control

persons from acting in the best interest of the company. The duty to act in good faith may be

measured by an individual's particular knowledge and expertise. The higher the level of

expertise, the more accountable that person will be. The Fiduciary Duty in the 21st Century

Programme, led by the United Nations Environment Programme Finance Initiative,

the Principles for Responsible Investment, and the Generation Foundation, aims to end the

debate on whether fiduciary duty is a legitimate barrier to the integration of environmental,

social and governance (ESG) issues in investment practice and decision-making.15 This followed

the 2015 publication of "Fiduciary Duty in the 21st Century" which concluded that “failing to

consider all long-term investment value drivers, including ESG issues, is a failure of fiduciary

duty".[93] Founded on the realization that there is a general lack of legal clarity globally about the

relationship between sustainability and investors’ fiduciary duty, the programme engaged with

and interviewed over 400 policymakers and investors to raise awareness of the importance of

ESG issues to the fiduciary duties of investors16. The programme also published roadmaps which

set out recommendations to fully embed the consideration of ESG factors in the fiduciary duties

of investors across more than eight capital markets.[5] Drawing upon findings from Fiduciary

Duty in the 21st Century, the European Commission High-Level Expert Group (HLEG)

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recommended in its 2018 final report that the EU Commission clarify investor duties to better

embrace long-term horizon and sustainability preferences.

Some experts have argued that, in the context of pension governance, trustees have started to

reassert their fiduciary prerogatives more strongly after 2008 – notably following the heavy

losses or reduced returns incurred by many retirement schemes in the wake of the Great

Recession and the progression of ESG and Responsible Investment ideas: "Clearly, there is a

mounting demand for CEOs (equity issuers) and governments (sovereign bond issuers) to be

more 'accountable'.No longer ‘absentee landlords', trustees have started to exercise more

forcefully their governance prerogatives across the boardrooms of Britain, Benelux and America:

coming together through the establishment of engaged pressure groups.17

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 CONCLUSION

A trust can be used to determine how a person’s money should be managed and distributed while

that person is alive, or after their death. A trust helps avoid taxes and probate. It can protect

assets from creditors, and it can dictate the terms of an inheritance for beneficiaries. The

disadvantages of trusts are that they require time and money to create, and they cannot be easily

revoked.18

A trust is one way to provide for a beneficiary who is underage or has a mental disability that

may impair his ability to manage finances. Once the beneficiary is deemed capable of managing

his assets, he will receive possession of the trust.

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more

other parties (person or group of persons). Typically, a fiduciary prudently takes care of money

or other assets for another person. One party, for example, a corporate trust company or the trust

department of a bank, acts in a fiduciary capacity to another party, who, for example, has

entrusted funds to the fiduciary for safekeeping or investment. Likewise, asset managers,

including managers of pension plans, endowments, and other tax-exempt assets, are considered

fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in a

position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another

whose aid, advice, or protection is sought in some matter. An essential aspect of the nature of

trusteeship is that a trustee stands in a fiduciary relationship to the beneficiaries of the trust,

which means that he must not allow any conflict between his own interests and the interests of

18
https://papers.ssrn.com(visited on 11/03/19)
the beneficiary, and that he must not make any unauthorized profit for himself from his position

as trustee. This chapter examines the nature and extent of fiduciary duties. It discusses the

fiduciary relationship; unauthorized remuneration; purchase of trust property by trustees;

incidental profits; liability for breach of fiduciary duty; remedies where a fiduciary makes an

unauthorized profit; and defences to an action for breach of fiduciary duty. Fiduciary duties in a

financial sense exist to ensure that those who manage other people’s money act in their

beneficiaries' interests, rather than serving their own interests19. The Fiduciary Duty in the 21st

Century programme finds that, "far from being a barrier, there are positive duties to integrate

environmental, social and governance (ESG) factors in investment processes." The programme

also concludes that “integrating ESG issues into investment research and processes will enable

investors to make better investment decisions and improve investment performance consistent

with their fiduciary duties. The duty of good faith requires control persons to exercise care and

prudence in making business decisions—that is, the care that a reasonably prudent person in a

similar position would use under similar circumstances. Control persons fail to act in good faith,

even if their actions are not illegal, when they take actions for improper purposes or, in certain

circumstances, when their actions have grossly inequitable results. The duty to act in good faith

is an obligation not only to make decisions free from self-interest, but also free of any interest

that diverts the control persons from acting in the best interest of the company. The duty to act in

good faith may be measured by an individual's particular knowledge and expertise.

19
http://www.legalservicesindia.com/article/1630/(visited on 11/03/19)
 BIBLIOGRAPHY

Sites referred:-

 https://blog.ipleaders.in/trusts
 https://www.lawteacher.net
 https://papers.ssrn.com
 https://www.quora.com/fiduciary duty
 https://arxiv.org
 http://www.legalservicesindia.com/article/1630/
 https://indiankanoon.org

Books:-

 The property act 1872 by R.K.Sinha

 MULLA’s TP ACT 1872
 Property Law by Poonam pradhan Saxena
 Intellectual Property Law by P.Narayanan