Creation of Trust

INTRODUCTION

On 1 day of March 1882, the Trust Act came into force. This Act extends to the whole of Pakistan. This act does not affect the Islamic law as to waqf, or the mutual relation of the members of an undivided family as determined by any customary or personal law or applies to public or private religious or charitable endowments or to trust to distribute prizes taken in warm among the captors and this Act does not have retrospective effect.

LITERAL MEANING OF TRUST

According to Section 3 of the Trust Act, of 1882:

“A trust is 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 another and the owner.”

AUTHOR OF TRUST

The person who declares confidence in someone is called the author of the trust.

TRUSTEE

The person who accepts the confidence is called the trustee.

BENEFICIARY

The person for whose benefit the confidence is accepted is called the beneficiary.

THE BENEFICIAL INTEREST

The beneficial interest or interest of the beneficiary is his right against the trustee as owner of the trust property.

1. LAWFUL PURPOSE

It is a very essential requirement of the creation of the trust that the trust must be created for any lawful purpose. According to section 4 of the Trust Act, of 1882 a trust may be created for any lawful purpose.

Illegal Purpose of Trust

Forbidden by Law
Defeat the Provision of any Law
Fraudulent
Injury to the Person or Property of another
Immoral
Against the Public Policy

2. TRUST OF IMMOVABLE PROPERTY

It is a general rule provided in Section 6 that no trust about immovable property is valid

Exception:

A trust about immovable property is valid if declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered or by the will of the author of the trust or the trustee.

3. TRUST OF MOVABLE PROPERTY

It is a general rule provided in Section 5 that no trust about movable property is valid.

Exception:

A trust about movable property is valid if declared by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered or by the will of the author of the trust or the trustee or the ownership of the property is transferred to the trustee.

4. CREATION OF TRUST

Indication:

A trust is created when the author of the trust indicates the creation of the trust.

Modes of Indication:

(a) Express Indication: If the author of trust uses words in the creation of a trust, it is known as express trust.

(b) Implied Trust: If the author of trust does some acts in the creation of the trust, it is known as implied trust.

Intention:

The main and very vital essential for the creation of a valid trust intention should be reasonable certainty indicating the purpose of the trust.

The Purpose of Trust:

The purpose of the trust is also a very necessary and important factor for the creation of valid trust

The Beneficiary:

For the creation of a valid trust, it is requisite that there should be reasonable certainty indicating the beneficiary.

Trust Property:

The presence of trust property is essential for the creation of a valid trust.

Transfer of Trust Property:

After the completion and fulfilment of the essentials for the creation of a trust, it is the transfer of trust property is essential to the transferee or trustee, from the author of the trust۔

Reasonable Certainty:

There should be reasonable certainty in respect of the essentials of the trust, for the creation of a valid trust.

5. SUBJECT OF TRUST

The subject matter of the trust must be property transferable to the beneficiary. It must not be merely a beneficial interest under a subsisting trust.

6. WHO CAN BECOME THE BENEFICIARY?

Every person who is capable of holding the property may be a beneficiary.

7. WHO CAN BECOME A TRUSTEE?

Every person capable of holding property may be a trustee but where trust involves the exercise of discretion, he can not execute it unless he is competent to contract.

8. WHO CAN NOT BECOME A TRUSTEE?

The following can not become trustees according to section 60 of the Trust Act.

A person domiciled abroad
An alien enemy
A person having an interest inconsistent with that of the beneficiary
A person in insolvent circumstances

BREACH OF TRUST

A breach of any duty imposed on a trustee as such by any law for the time being in force is called a breach of trust.

RULE OF THREE CERTAINTIES

Lord Langdale. MR has laid down that three things are necessary for the creation of the trust. These are as under

Certainty of Words
Certainty of Object
Certainty of Subject matter

Certainty of Words:

Certainty being an essential requirement for the constitution of a trust, the words expressing a trust must be so used that on the whole, they ought to be construed as imperative.

Certainty of Object:

Certainty of an object or the beneficiary is also necessary validity of a trust, except where the trust is for the benefit of “charity”. A non-charitable trust fails if the object is uncertain.

Certainty of Subject matter:

The subject matter of a trust must be property transferable to the beneficiary Property of any kind, movable or immovable, that is legally transferable can be the subject matter of the trust.

ESSENTIALS OF VALID TRUST

The following are the requisites/essentials of a valid trust.

The intention of the author of the trust
The lawful purpose of the trust
Transfer of Possession of trust property
The beneficiary’s Subject matter

HOW A VALID TRUST CREATED?

Trust is created when

The author of the trust indicates with reason certainty, by words or acts: an intention on his part to create thereby a trust.
The purpose for which the trust is to be created must be lawful
The beneficiary or beneficiaries are nominated specifically
The trust property is indicated with reasonable certainty and
Except in the case of a trust declared by will or when the author of the trust is himself to be the trustee, the trust property is transferred to the trustee

CONCLUSION

It is concluded that a trust is unlawful if it is fraudulent, forbidden by law immoral or opposed to public policy, etc. For the creation of the trust, the author of the trust must indicate with reasonable certainty his intention to create the trust, the purpose of the trust beneficiary, and the trust property After that, the transfer of the property to the trustee must be followed. Every person who is capable of holding property may be a trustee. The essentials for valid trust and creation of valid trust.

FAQs

How a trust is created and what are the requisites for the creation of trust?

(2019-S, 2018-A, 2013-A)

The lawful object is an essential element in trust. Briefly explain the object of trust. When the object of trust is unlawful?

(2019-A)

What are lawful objects of trust? What are the effects of unlawful objects explain?

(2018-S, 2017-A, 2016-A)

Explain trust in detail. What are its essentials and when the object of trust is lawful?

(2015-S)