A Trust can be understood as a group of like-minded people formally coming together with a common purpose of doing something good for the public. A Trust can be either a private or public Trust. A private Trust exists for the benefit of a particular person(s), whereas a public Trust exists for the benefit of the public, irrespective of class, caste, religion, etc. Here, we shall limit ourselves to the Public Trust, in which we are all involved.
The word “trust” means a firm belief in the reliability, truth, or ability of someone or something. Here it is applicable to the founder trustee(s), who, having placed his/her/their trust in the reliability of the future trustees, have bequeathed his/her/their property or assets for the beneficiaries of the trust. The Indian Trust Act of 1882 defines a Trust as an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, for the benefit of the beneficiaries.
A Trust is a legal entity created by the founder, who authorizes the trustees to hold the right to manage the founder’s assets or property for the benefit of the beneficiaries of the Trust. The person who reposes the confidence is the founder of the Trust; the person(s) who accept(s) the confidence is the Trustee; the person(s) for whose benefit the confidence is accepted is the beneficiary; the subject matter of the Trust is the Trust property; and the Instrument by which the Trust is declared is the Trust Deed, which spells out the objects of the Trust.
Essential Elements
Thus, a Trust has these five essential elements: Founder, Trustee(s), Beneficiaries, Trust Property and Trust Deed with the Objects of the Trust clearly spelt out. As per Section 6 of the Indian Trusts Act (1882), a Trust is created when the Founder of the Trust shows his/her intention to create a Trust, spells out the Purpose of the Trust and its Beneficiaries, identifies the asset/property he/she would like to pass on to the Trust and legally and irrevocably transfers the same to the Trust. This is done in a public forum. Once done, it becomes a public legal entity.
To become a public legal entity, the Trust Deed has to be registered with a public authority, who, after approving the same, registers the name of the legal entity in the official register with its registration number and date of registration and issues a certificate to the same effect. This is called the Trust Registration Certificate. The legal entity comes in to existence the day it is registered with the public authority. A Charitable Society or a non-profit Company under Section 8 is also created in a like manner with a public authority.
When someone becomes a Trustee, he/she inherits all that has gone before in the making of the Trust, especially, its purpose (objects), property and beneficiaries and gives his/her best to fulfill the purpose for which the Trust has been created. Hence it is necessary that every Trustee becomes familiar with all the clauses of the Trust and runs the Trust as a custodian, with a sense of great responsibility, so much so that, even if the Trust Deed is amended, its original purpose and beneficiaries cannot be altered. Hence, a Trust cannot be wound up at any point of time, and, even if it were to be done as a last resort with due permission, the assets are to be passed on to another Trust with similar purpose and activities. Thus its sacredness is preserved for ever.
In the next issue, we shall see how a Trust is run.
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