Management and other concepts of Trust

In our previous article we have briefly narrated what is trust and how it can be created, who is Trustee, Beneficiary, Creator etc.

In this write up we will discuss what are the duties and liabilities, rights and power of Trustee, and Beneficiary. The same has been widely described under The Indian Trust Act, 1882.

Duties and Liabilities of Trustee

  • Whenever the author execute the trust and the trustee accepts it, it becomes the duty of trustee to obey the directions of the author as given at the time of its creation, however the same gets varied if there is some modification which is acceptable to the beneficiary. But trustee should not in any manner impracticable, illegal or manifestly injurious to the beneficiaries

    For example: A, a trustee, is simply authorised to sell certain land by public auction. He cannot sell the land by private contract.

  • After creation of trust, trustee should as soon as possible transfer the trust property to himself and start looking for managing trust money. For example: The trust-property is a debt outstanding on personal security. The instrument of trust gives the trustee no discretionary power to leave the debt so outstanding. The trustee’s duty is to recover the debt without unnecessary delay.;
  • Trustee should always protect title to trust property.

    For example: The trust-property is a debt outstanding on personal security. The instrument of trust gives the trustee no discretionary power to leave the debt so outstanding. The trustee’s duty is to recover the debt without unnecessary delay

  • Trustee must not create any title for himself or other person except from beneficiary.
  • Trustee must take care of the trust property as it is his own property

    For example: A, a trustee directed to sell the trust-property by auction, sells the same, hut does not advertise the sale and otherwise fails in reasonable diligence in inviting competition. A is bound to make good the loss caused thereby to the beneficiary.

  • If there are more than one beneficiary then trustee should not biased in his decision and to be impartial.
  • Trustee should maintain proper record of accounts for the trust property and it should be available as and when beneficiary wants to see the same.
  • If a trustee commits some breach then he is liable to make good the loss which the trust property has sustained because of the act of trustee. A trustee committing a breach of trust is not liable to pay interest except in the following cases:—
    1. where he has actually received interest
    2. where the breach consists in unreasonable delay in paying trust-money to the beneficiary
    3. where the trustee ought to have received interest, but has not done so;
    4. where he may be fairly presumed to have received interest
    Trustee will be liable in case of a) to the amount of interest received and all other cases he will be liable for simple interest at the rate of 6% p.a. or any other interest as decided by the court. For example: A bequeaths a house to B in trust to sell it and pay the proceeds to C. B neglects to sell the house for a great length of time, whereby the house is deteriorated and its market-price falls. B is answerable to C for the loss
  • When the beneficiary’s interest is forfeited or awarded by legal adjudication to the Government, the trustee is bound to hold the trust-property to the extent of such interest for the benefit of such person in such manner as the State Government may direct in this behalf.
  • As per the provision of trust, trustees shall be respectively responsible only for such moneys, stocks, funds and securities as they respectively actually receive, and shall not be answerable to the third party, nor for any banker, broker or other person in whose hands any trust property may be placed, nor for the insufficiency or deficiency of any stocks, funds or securities, nor otherwise for involuntary losses.

Rights and Power of Trustee

  • A trustee is entitled to have in his possession the instrument of trust and all the documents of title (if any) relating solely to the trust-property.
  • A trustee has right to get reimbursement of expenses, if trustee has incurred any expense on maintenance of trust property.
  • A person other than a trustee who has gained an advantage from a breach of trust must indemnify the trustee to the extent of the amount actually received by such person under the breach; and where he is a beneficiary the trustee has a charge on his interest for such amount.
  • Trustee shall have right to exercise power as given in the instrument of trust.
  • Any trustees or trustee may give a receipt in writing for any money, securities or other moveable property payable, transferable or deliverable to them

Rights and Liabilities of Beneficiary

Under the Indian Trust Act, 1882, beneficiary has below given rights to exercise:

  • Right to receive rent and profits of trust property
  • Right to inspect and take copies of instrument of trust, accounts, etc
  • Right to transfer beneficial interest
  • Right to sue for execution of trust
  • The beneficiary has a right that his trustee shall be compelled to perform any particular act of his duty
  • Where the trustee wrongfully mingles the trust property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him
  • Every person to whom a beneficiary transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in respect of such interest at the date of the transfer.

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