INDIAN TRUST ACT, 1882- BASICS

Table of Contents

• Introduction
• Section 3 – Interpretation Clause
• Purpose of Trust (Section 4)
• Section 5 – Immovable and Movable Trust
• Creation of Trust (Section 6)
• Who May Create the Trust (Section 7)
• Subject of Trust (Section 8)
• Who May Be Beneficiary (Section 9)
• Who May Be a Trustee (Section 10)
• Difference Between Trust and Agency
• Difference Between Trust and Contract
• Kinds of Trust

Introduction

This act came into force from 1st March, 1882. This act extends to the whole of India. This act deals with the law relating to the private trust and the trustees. It deals with right, liabilities, disabilities of the trustee and as well as of the beneficiary.

Section 3 – Interpretation Clause

Section 3 is the Interpretation clause of this act provides various definitions such as:

• Trust: 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 of another and the owner.
• Author of trust: The person who reposes or declares the confidence 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 the beneficiary. The beneficiary is also called as the cesstui que trust i.e. the person who gets benefit from the trust.
• Trust Property/Trust Money: The subject matter of trust is known as trust property or trust money.
• Beneficial Interest: It is the right of beneficiary as against the trustee as owner of trust property.
• Instrument of Trust: The instrument by which trust is declared is known as trust instrument.
• 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”.

Purpose of Trust (Section 4)

According to Section 4, a trust must be created for a lawful purpose and the purpose of trust should not be:

• Forbidden by law
• Such of nature if permitted would defeat provisions of any law
• Fraudulent
• Involves or implies injury to property of another
• Immoral or against public policy

This section also defines:

• Valid Trust: The trust whose purpose is lawful.
• Void Trust: The trust whose purpose is not lawful.
• Partly Valid and Partly Void Trust: When the purposes are inseparable, the whole trust is void. If separable, the valid part stands.

Section 5 – Immovable and Movable Trust

• Trust of Immovable Property: Trust of immovable property is valid only when declared by a non-testamentary instrument in writing signed and registered, or by will of the author/trustee.
• Trust of Movable Property: Trust of movable property is valid only when ownership is transferred to trustee or declared similarly.

These rules do not apply to effectuate fraud.

Creation of Trust (Section 6)

Section 6 of the Indian Trust Act, 1882 outlines the essential elements that must be clearly indicated—either through words or actions—by the author of the trust for a valid creation. Essential elements for creation of trust are:

1. Intention to Create a Trust

For a trust to exist, there must be a clear and definite intention on the part of the author to create it. If the owner lacks the intent to form a trust, then no trust can be said to exist. Intention is the very foundation upon which a trust is built.

“No intent, no trust.”
This simple rule ensures that trusts are not created accidentally or by implication.

2. Lawful Purpose of the Trust

The purpose of the trust must be lawful. If the purpose:

• is entirely lawful, the trust is valid.

• is partly lawful and partly unlawful, only the lawful part is considered valid (provided it can be separated from the unlawful one).

A trust with an unlawful purpose is void from the beginning.

3. Existence of a Beneficiary

Every trust must have a beneficiary – someone who will benefit from the trust.
Without a beneficiary, there’s no purpose for which the trust exists, and thus, the trust cannot be recognized.

Think of the beneficiary as the heart of the trust – without one, it simply doesn’t beat.

4. Definite Trust Property

There must be a clearly defined trust property. This is the subject matter over which the trust operates. Without specific property, there is nothing for the trust to manage or protect.

The trust property is the anchor of the entire trust framework.

5. Transfer of Property to the Trustee

Finally, there must be a transfer of the trust property to the trustee.
This handover of control is what activates the trust. Without the transfer, the trustee has no power or responsibility to manage the trust property.

No transfer = No trustee = No trust in action.

Who May Create the Trust (Section 7)

Section 7 defines the parties who may create the trust as follows:

• The parties must be competent to contract.
• Any person can create the trust on behalf of the minor but for this purpose he must have to take approval from the High court or District court.

Subject of Trust (Section 8)

Section 8 provides that the subject matter of trust must be property transferable to the beneficiary

Who May Be Beneficiary (Section 9)

Section 9 provides that a person capable of holding property may be a beneficiary – including a minor or unborn child.

Disclaimer: A proposed beneficiary may renounce interest by disclaimer to trustee or by inconsistent claim.

Who May Be a Trustee (Section 10)

Section 10 provides that a person who is capable of holding property can be a trustee, but where it involves the exercise of discretion, he cannot execute unless he is competent to contract. It means a person incompetent to contract can make a trust but cannot exercise his discretion on it.

No one bound to accept the trust- This section also provides that no one is bound to accept the trust.

Acceptance of Trust- The trust can be accepted by the words or act of the trustee indicating with reasonable certainty such acceptance.

Disclaimer of Trust- Instead of accepting the trust, the trustee may within a reasonable period , disclaim it, and such disclaimer render him to be property vested in him.

Difference Between Trust and Agency

Difference Between Trust and Contract

Kinds of Trust

1. Express Trust

An Express Trust is created through explicit words or written documents.

It doesn’t arise by accident or implication — it’s formed when the author clearly expresses the intention to create a trust.

2. Implied Trust

An Implied Trust arises from the conduct or circumstances, even when there’s no explicit declaration.

It is based on the principle that actions speak louder than words — the law implies the existence of trust from the facts.

3. Constructive Trust

A Constructive Trust is not created by a party, but is imposed by the court.

It occurs when someone wrongfully holds property that rightfully belongs to another. To prevent unjust enrichment, the court directs that the property be held in trust for the rightful person.

4. Private Trust

A Private Trust is a kind of trust which benefits specific individuals or a class of persons.

It is personal in nature, and the beneficiaries are clearly defined.

5. Public Trust

A Public Trust is created for the benefit of the general public or a large section of society.

These are often associated with public services like education, healthcare, or religious offerings.

6. Charitable Trust

A Charitable Trust is a form of public trust, created for humanitarian or religious purposes.

Its aim is to serve the public good, such as running schools, hospitals, temples, or feeding the poor.

7. Precatory Trust

A Precatory Trust arises when someone wishes or hopes that a person will use their property for a particular purpose.

However, it is not legally binding — it’s more of a moral obligation than a legal one.

8. Resulting Trust

A Resulting Trust occurs when a trust:

• Cannot be carried out, or

• Is completely executed, but some property remains unutilized

In such cases, the trustee must hold the remaining property for the benefit of the author of the trust or their legal representative.