Formation of Trusts

under the Trusts Act, 1882

Munaem Khan
Lecturer in Law
Eastern University
Contents discussed (sections1-10)
1. Definition of trust
2. Lawful purpose for a Valid trust
3. Trust of immoveable and moveable property
4. Creation of trusts
5. Competency to create trust
6. Who can be a beneficiary
7. Trustee and acceptance of trust
Definition of Trust
 Trust is an obligation annexed to the
ownership of property, arising out confidence
reposed in and accepted by the owner for the
benefit of another, or for the owner or for
owner and other.
Lawful purpose for a Valid trust

 Unlawful purposes are:.

1. forbidden by law
2. Defeat any provision of law
3. Fraudulent
4. Injurious to person or property of another
5. Immoral or against public policy
If there is unlawful purpose
 A trust for unlawful purpose is void.
 When more than one purposes, if the lawful

purpose is severable then the trust is valid to

that extant. Otherwise the whole trust is void.
Trust of immoveable
and moveable property
 Trust of immoveable property may be created
by non-testamentary instrument or by will

 In case of moveable property, it may be

created by transfer of ownership to trustee
too.
Creation of trusts
 Rule of 3 THREE CERTAINTIES:
1. Intention to create trust
2. Purpose of the trust
3. Subject matter of the trust
4. Beneficiary
5. Transfer of the subject matter to trustee
Competency to create trust
 Any one competent to contract
 Minor or his guardian with permission of

court
Who can be a beneficiary
 Anyone capable of holding property (sui juris)
 Minor, even an unborn person can be

beneficiary
 If unborn person becomes beneficiary, rule

against perpetuity shall be followed

 A beneficiary can disclaim either expressly or

by making an inconsistent claim
Trustee and acceptance of trust
 Anyone capable of holding property
 Thus minor can be a trustee
 Exception: to take a decision, he must be

competent to contract
Acceptance and Disclaimer
by trustee
 Acceptance of the trust is voluntary. It may be
express or implied.
 If accepted, the trust property is vested on

the trustee
 Trustee may disclaim within a reasonable

time
 Consequence of disclaimer: property will not

vest on him
 If one of several proposed trustees disclaim,

trust will take effect on rest of the trustees.