CREATION & ESSENTIALS OF A VALID TRUST LLB Notes

CREATION & ESSENTIALS OF A VALID TRUST

INTRODUCTION:

Trust is a very interesting concept in which the real owner of the property, reposes or deposits
his property for its management or usage in other person for the benefit of a third person.

MEANING:

Trust is an obligation annexed with the ownership of property.

DEFINITION:

According to BACON:

 “A trust is the binding of the conscience of one to the intention of another.”

PARTIES OF A TRUST:

Section:3 of trust act enumerates the following parties:

1-The person who reposes or declares the confidence is called author of the trust.

2-The person who accepts the confidence is called a trustee.

3-The person whose benefit the confidence is created is known as a beneficiary.

CREATION OF A TRUST:

SECTION:6 of trust act deals with the creation of a trust. Trust is created when the author of
trust indicates with reasonable certainty by any words or acts:

1-An intention on his part to creat a trust (Remora V. Moore)”Trust is void for its uncertainty”.

2-The purpose of trust

3-Beneficiary

4-Trust property

5-Transfers the trust property to the trustee

RULE OF THREE CERTAINTIES:

In the case of Knight V. Knight(1840) Lord Langdale has introduced the rule of three certainties
in which he said that a valid trust cannot be created unless these certainties are present:

•  Certainty of intention

• Certainty of subject-matter

•  Certainty of object

ESSENTIALS/PRE-REQUISITES OF A VALID TRUST:

1-INTENTION TO CREATE TRUST:

The first essential of a valid trust is the intention to creat a trust ,with certainty so that no doubt
as to the creators intention remains.

2-PURPOSE AND OBJECT:

The second essential for a valid trust is that the purpose must be lawful and clear. U/S:4 it is
clearly stated that a trust must be for a lawful purpose because a trust which is created with an
unlawful object or purpose is void.

3-BENEFICIARY:

The trust is created primarily for the benefit of the beneficiaries. Hence, there should be no
ambiguity as to the names of the beneficiaries.

WHO MAY BE BENEFICIARY?

Sec:9 says that every person who is capable of holding property may be a beneficiary.

4-SUBJECT MATTER:

Subject matter of trust is known as Trust property(sec:3).Property of any kind either movable
or immovable. That is legally transferable can be a subject of trust.
According to sec:8 the subject matter of a trust must be property which is transferable to
beneficiary.

5-TRANSFER OF TRUST PROPERTY:

Transfer of trust property is essential to trustee. Although, it is not necessary where the author
of trust is himself a trustee.

MODE OF TRANSFER:

In case of immovable property:

Through non-testamentary or a testamentary instrument it must be:

a- Written

b- Signed by author of the trust

c- Registered e.g under sec:17 of Registration Act,1908.

In case of movable property:

Must comply with the conditions mentioned aforesaid or through the ownership of the
property is transferred to trustee.

6-COMPETENCY OF TRUST AUTHOR:

U/S:7 a trust may be created by every person competent to contract.
In case by or on behalf of minor prior permission of a civil court is required.

7-COMPETENCY OF TRUSTEE:

SEC:10 states that every person who is capable of holding property may be a trustee but where
the trust involves the exercise of discretion he cannot execute it unless he is competent to
contract e.g in consonance with sec:11 of Contract Act,1872.

8-ACCEPTANCE OF TRUST:

Another very important essential which is necessary for the validity of trust, laid down in sec:10
is that the trust should be accepted by the trustee.
Such acceptance should be indicated with reasonable certainty either by
1-Acts
2-Words
No one is bound to accept trust and always has an option to disclaim it.

Rule of Disclaimation:

Within reasonable time as a result of which the trust property would not be vested in him.