A trust under the Indian Trusts Act, 1882, is a legal obligation where a trustee manages property for a beneficiary. Created through clear intention, lawful purpose, and identifiable elements, it ensures fiduciary duty and asset protection for the benefit of another individual or group. 

Trust is a fundamental concept that plays a crucial role in both our interactions and the legal systems that shape society. In everyday life, trust is the confidence we place in others to act with integrity, fulfill promises, or uphold expectations. However, in legal terms, trust carries a more structured and enforceable meaning. It refers to a formal relationship in which one party transfers property to another, with the understanding that it will be managed or used for the benefit of a third party. This legal relationship imposes clear duties and obligations that are protected and regulated by law.

In the Indian context, private trusts are governed by the Indian Trusts Act of 1882. This historic piece of legislation provides a detailed legal framework for the creation, administration, and dissolution of trusts. It defines the roles and responsibilities of the person who creates the trust (the settlor), the person who manages it (the trustee), and the person who benefits from it (the beneficiary). Through its provisions, the Act ensures that trusts operate transparently and responsibly, offering legal protection to all parties involved and reinforcing the essential principle of accountability in fiduciary relationships.

Also Read: Rights and Disabilities of a Beneficiary

Legal Definition and Nature of a Trust

In the Indian legal system, the concept of a trust finds its formal foundation in Section 3 of the Indian Trusts Act, 1882. The Act 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, or declared and accepted by him, for the benefit of another, or of another and the owner.”

To break this down, a trust is essentially a legal commitment that is attached to ownership of a particular property. This obligation originates from a relationship of confidence between two parties, the person who owns the property and another person in whom that confidence is placed. It involves the owner either willingly transferring the responsibility or formally acknowledging a duty to manage the property for someone else’s benefit.

This definition captures several important elements:

• Obligation connected to ownership: The property is not held in an unrestricted manner. The ownership is tied to a specific duty or responsibility.
• Reposed and accepted confidence: The trust originates from a sense of reliance or trust placed by one person in another, and crucially, the person receiving the trust must accept this role.
• Presence of a beneficiary: A trust cannot exist in a vacuum. There must be someone for whom the trust is created, someone who will benefit from the property held in trust.
• Clear intention and declaration: Whether through words or actions, the person creating the trust must show a definite intention to set up such a relationship. This declaration can be made formally through a legal document or by behavior that leaves no room for doubt.

In simple terms, a trust is a legal mechanism where one party holds property, not for personal use, but to manage it responsibly for someone else’s benefit.

The Main Parties Involved in a Trust

Every trust involves a triangular relationship. There are always at least three key roles that are necessary to form and operate a trust effectively:

• The Author of the Trust (also known as the Settlor): This is the person who originally owns the property and decides to place it under a trust. The author reposes confidence in another individual to use or manage the property not for his benefit, but for the benefit of someone else. The creation of the trust may be done voluntarily, either during the author’s lifetime or by a will.
• The Trustee: The trustee is the person (or persons) who agrees to accept the responsibility of managing or dealing with the trust property according to the directions of the author. The trustee holds the legal title to the property but is legally bound to use it only in the way specified in the trust and for the benefit of the intended party. Trustees are expected to act with honesty, loyalty, and a high degree of care.
• The Beneficiary: This is the individual or group of individuals for whose benefit the trust is created. The beneficiary holds the beneficial interest in the trust property, meaning they have the right to benefit from the assets, although they may not have legal ownership. Beneficiaries have legal rights under the trust and can approach courts if their rights are violated.

In addition to the main parties, a trust involves two more important concepts:

Trust Property (or Trust Money)

This refers to the assets that are transferred into the trust. It could be land, money, shares, or any form of property that the author chooses to set aside for the benefit of the beneficiary. Once the trust is created, the property is legally held by the trustee but cannot be used for the trustee’s personal gain.

Instrument of Trust

This is the legal document in which the terms of the trust are recorded. It outlines the roles and responsibilities of the trustee, the nature and extent of the trust property, the rights of the beneficiary, and the purposes of the trust. While a trust can sometimes be created without a formal document (especially in the case of oral trusts or implied trusts), having an instrument provides clarity and makes the trust easier to enforce in legal proceedings.

Objectives and Scope of the Indian Trusts Act, 1882

The Indian Trusts Act of 1882 was enacted with a clear and focused purpose—to provide a legal framework for the creation and regulation of private trusts in India. At its core, the Act is designed to establish legal certainty and transparency in relationships where one party holds property for the benefit of another. By clearly outlining the rights, duties, and responsibilities of all parties involved in a trust, the Act aims to minimize disputes and ensure that the intentions of the person creating the trust are faithfully carried out.

One of the most important things to understand about the scope of the Indian Trusts Act is that it is limited to private trusts. These are trusts created for the benefit of specific individuals or a defined group, such as family members, business partners, or other known beneficiaries. In such arrangements, the trust is typically used to manage property, safeguard assets, or plan for succession in a legally structured manner.

Public trusts, especially those created for religious or charitable purposes, are not governed by this Act. Instead, they fall under the jurisdiction of other laws, such as the Religious Endowments Act of 1863, the Charitable and Religious Trusts Act of 1920, or various state-level enactments that specifically deal with religious and charitable endowments. These laws cater to the broader public interest and are designed with different principles in mind, reflecting the distinct nature of public trusts compared to private ones.

The Indian Trusts Act also does not apply to Muslim endowments or waqfs, as these are governed by Islamic law and special waqf legislation.

Essential Elements of a Valid Trust

Creating a valid trust under Indian law involves more than simply expressing goodwill or making a promise. It requires adherence to specific legal conditions as set out in the Indian Trusts Act, 1882. Each of these elements plays a crucial role in ensuring that the trust is enforceable and serves its intended purpose effectively. Let’s explore each element in detail.

#1 Clear Intention to Create a Trust

One of the most fundamental requirements for a valid trust is the presence of a clear and definite intention to create one. This is emphasized in Section 6 of the Act, which states that a trust comes into existence when the author of the trust expresses an intention to create it with reasonable certainty, either through words or actions.

It’s not enough for the person creating the trust (known as the author or settlor) to have a general hope or wish; the intention must be deliberate and clearly communicated. For instance, if someone says, “I hope my friend will use this money wisely,” that doesn’t constitute a trust. But if the person says, “I give this money to B with the firm confidence that he will use it for C’s education,” this reflects a clear intention to impose an obligation, thus forming a valid trust.

An illustration from the Act explains this clearly: If A bequeaths property to B, stating that he has the fullest confidence that B will use it for the benefit of C, this is taken as a valid declaration of trust. The law recognizes this as entrusting B with a duty towards C, and such a statement carries legal force.

#2 Lawful Purpose

Every trust must be created for a lawful purpose. Section 4 of the Act outlines what qualifies as a lawful purpose and, importantly, what doesn’t. A trust cannot be established for an illegal or unethical objective. If the purpose of the trust is contrary to the law, fraudulent in nature, immoral, or against public policy, the trust becomes invalid.

To put it simply, you cannot create a trust to fund or facilitate activities that the law prohibits. For example, if someone tries to set up a trust to finance a smuggling operation or to train individuals for unlawful professions such as prostitution, such a trust would be null and void from the outset. The law strictly ensures that trusts serve only those purposes that align with the legal and moral fabric of society.

Even if a trust has a mixture of lawful and unlawful objectives, and these cannot be separated, the entire trust will be declared void. This ensures that illegality in any part of the trust doesn’t find a backdoor into legal recognition.

#3 Definite Trust Property

Another essential element is that there must be specific property associated with the trust. According to Section 8 of the Act, the subject matter of the trust must be clearly defined and capable of being transferred to the trustee.

In simpler terms, you can’t create a trust without identifying what exactly is being put into it. The trust property could be immovable, like a house or a piece of land, or movable, such as shares, money, or jewelry. However, it must be something that is legally transferable and can be distinctly identified.

One cannot, for instance, declare a trust over an undefined interest or vague rights in another ongoing trust. The property must exist in a form that can be handed over to the trustee to manage on behalf of the beneficiary.

#4 Certain and Identifiable Beneficiary

Every valid trust must have at least one beneficiary—the person for whose benefit the trust is created. As per Section 9, any person who is capable of holding property can be named as a beneficiary. This includes individuals, groups, or even unborn persons (under certain legal conditions).

However, the beneficiary must be identifiable. If the settlor says the trust is to benefit “some deserving people” or “whoever I think is suitable,” it may not pass the legal threshold, as it lacks certainty. Courts require that the person or class of persons who will benefit from the trust be described in a manner that leaves no room for ambiguity.

#5 Compliance with Legal Formalities

The form in which a trust is created also plays a significant role in determining its validity. Section 5 of the Act differentiates between trusts involving immovable property and those involving movable property.

• For immovable property (such as land or buildings), the law requires that the trust be declared through a non-testamentary instrument (i.e., not a will), signed by the author of the trust or the trustee. Moreover, this document must be registered under the law governing the registration of property documents. Without registration, such a trust is not legally valid.
• For movable property (like cash, gold, or stocks), the law provides some flexibility. A trust can be created either by a written and signed declaration or by actually transferring the ownership of the property to the trustee. In this case, the act of physically handing over the property, along with the clear intent to form a trust, is sufficient.

This requirement ensures transparency and reduces the risk of disputes later on. It also provides a written record of the trust’s terms, which can be useful for both enforcement and administration.

Process of Creating a Trust Under the Indian Trusts Act, 1882

Establishing a trust isn’t just a matter of good intentions, it’s a formal legal process that must follow certain steps to ensure it is valid, enforceable, and serves the intended purpose. Below is a detailed breakdown of how a trust is created in India, following the principles outlined in the Indian Trusts Act, 1882.

Step 1: Declaration of Trust

The very first step in creating a trust is making an unequivocal declaration of trust. This declaration can be made through words, writing, or actions that unmistakably show the intention to create a trust.

To form a valid declaration, several key elements must be present:

1. Clear Intention to Create a Trust: The person creating the trust (known as the “author” or “settlor”) must demonstrate a definite and conscious intention to create a trust relationship. It’s not enough to simply express hope or moral expectations. For example, saying “I hope he uses this for the benefit of X” may not constitute a trust. The language must show a binding intention, such as “I direct that this property be held in trust for X.”
2. Defined Purpose of the Trust: There must be a specific and lawful objective behind the creation of the trust. The purpose could be to provide for a family member, support education, secure an inheritance, or any other goal permitted by law. If the purpose is vague or illegal (such as a trust created to carry out fraud), the trust will not be valid.
3. Clearly Identified Trust Property: The property forming the subject matter of the trust, known as the “trust property” or “trust fund”, must be clearly identified and capable of being transferred. This can include land, buildings, shares, money, or other forms of property. Vague or uncertain descriptions of the property will invalidate the trust.
4. Identifiable Beneficiary or Class of Beneficiaries: The person or group for whose benefit the trust is created, the “beneficiary”, must also be identified or at least ascertainable. A trust cannot exist if there is no clear indication of who will benefit from it.
5. Nomination or Assumption of a Trustee: Finally, the declaration should include who will act as the trustee, that is, the person responsible for managing the trust property. If the author of the trust does not wish to be the trustee, they must appoint someone else. The trustee must be capable of holding property and, if discretion is involved, also competent to contract.

Step 2: Transfer of Property to the Trustee

Once the intention is declared and the parties are identified, the next essential step is the transfer of the trust property to the trustee. This is particularly necessary in cases where the author of the trust is not the intended trustee.

Here’s how this works:

• If the property is immovable (like land or a house), the transfer must be done through a registered, written document. This is required under Section 5 of the Indian Trusts Act and is also in accordance with property laws.
• If the property is movable (like cash, securities, or jewelry), it can be transferred by simple delivery, or by a written instrument, depending on the nature of the asset.

Without the actual transfer of property, the trust cannot be said to be complete. The trustee must hold legal title or control over the property for the trust to be effective.

Step 3: Execution of the Instrument of Trust

Though not always mandatory, especially in the case of movable property or when the author is also the trustee, it is strongly recommended to execute a formal instrument of trust, a written document that records all terms and conditions of the trust.

A well-drafted trust deed typically includes the following details:

• Name and address of the author (settlor)
• Details of the trustee(s)
• Description of the trust property
• Purpose and objects of the trust
• Names of the beneficiaries
• Powers and duties of the trustee(s)
• Method of managing the trust
• Duration of the trust (if applicable)
• Procedure for amendment or dissolution

For immovable property, this trust deed must be registered to be legally enforceable. For other types of trusts, registration is advisable but not always compulsory.

The trust deed serves as the legal backbone of the arrangement. It protects the interests of the beneficiaries and lays down the responsibilities of the trustees, ensuring that everyone involved understands their role and obligations.

Step 4: Acceptance by the Trustee

Once the trust is declared and the property is transferred, the trustee must accept the responsibility of managing the trust. This acceptance can be:

• Explicit, through a written declaration or signature on the trust deed.
• Implicit, through conduct, such as beginning to manage or handle the trust property.

If a person refuses to accept the role of trustee, they must disclaim the trust, preferably in writing and within a reasonable time.

Step 5: Optional, Registration and Legal Formalities

Depending on the type of trust and nature of the property involved:

• Trusts involving immovable property must be registered under the Indian Registration Act, 1908.
• Charitable or religious trusts, although governed separately, often require registration under the Income Tax Act for tax exemptions.

Even if registration is not legally required, completing it enhances transparency, provides public notice, and may help avoid disputes in the future.

In short, creating a trust is like building a legal bridge from a person who owns something, to someone who needs it, managed responsibly by someone trusted. To construct this bridge properly, the law requires the process to be structured, deliberate, and documented.

Here’s a quick recap of the process:

1. Declare the intention to create a trust and identify all key elements.
2. Clearly define the purpose, property, and beneficiaries.
3. Transfer the property to the trustee (unless the settlor is the trustee).
4. Execute a written trust deed (especially for immovable property).
5. Obtain the trustee’s acceptance of the role and duties.
6. Complete legal formalities, including registration if required.

Who Can Create a Trust?

Creating a trust involves transferring ownership of property to a trustee for the benefit of another person. But not everyone is legally permitted to create such an arrangement. The Indian Trusts Act, 1882, under Section 7, lays down specific guidelines about who can legally establish a trust.

Competency to Create a Trust

To create a valid trust, the person must be legally capable of entering into a contract. This requirement is in line with Section 11 of the Indian Contract Act, 1872, which outlines the essential qualifications for contractual capacity.

In simpler terms, the person creating the trust, often called the “author” or “settlor” of the trust, must satisfy the following conditions:

• He or she must have attained the age of majority. This means the individual must be at least 18 years old. In certain cases where a guardian has been appointed, the age of majority may extend to 21 years. Anyone below this age is legally considered a minor and is not competent to create a trust on their own.
• The individual must be of sound mind. A person who is mentally unstable or suffers from a condition that impairs their ability to understand the implications of their actions cannot create a valid trust. The law requires that the person fully understand what it means to part with their property and establish fiduciary responsibilities.
• The person must not be disqualified by any law. Certain individuals may be barred from creating trusts due to specific legal prohibitions—for example, foreign nationals in certain contexts, or individuals declared insolvent or of unsound mind by a competent court.

So, essentially, any adult who understands the nature of their actions and is not legally prohibited from disposing of their property can create a trust.

Trusts Created on Behalf of Minors

While minors themselves cannot create trusts, the law does make provision for their interests. A trust may be created by a minor only with the permission of the principal Civil Court of original jurisdiction. More commonly, a trust can be created on behalf of a minor by a guardian, parent, or another person acting in the minor’s best interests, again subject to court approval.

Trustee: Roles, Duties, and Powers

Trustees play a pivotal role in the functioning and integrity of a trust. Appointed to manage and oversee trust property for the benefit of another, they act as fiduciaries, bearing both moral and legal responsibilities. The Indian Trusts Act, 1882, outlines who can be a trustee, what duties they must perform, and what powers they hold in the execution of a trust.

Eligibility to Act as a Trustee (Section 10)

Under the Act, any person who is capable of holding property is eligible to become a trustee. This includes individuals and legal entities like companies, provided they can legally hold and manage assets. However, there’s an important caveat: if the trust involves any discretionary powers, such as the ability to make decisions on investments or choosing beneficiaries, then the trustee must also be someone legally competent to contract. In other words, they must be of sound mind, above the age of majority, and not disqualified under any applicable law.

Acceptance and Disclaimer of Trust

One of the distinctive features of a trustee’s role is that it is not imposed without consent. A person named as a trustee is not compelled to accept the responsibility. They have the right to refuse or disclaim the trust, provided they do so within a reasonable time. That said, once a person accepts the trust, whether through explicit acceptance or by conduct that implies acceptance, such as managing or dealing with trust property, they are legally bound by its terms and cannot renounce their obligations without due process.

For example, if someone named in a will begins managing the deceased’s estate as outlined in the trust document, that conduct alone can be considered acceptance, even if they never formally declared it.

Duties of Trustees (Chapter III)

Trustees are bound by strict duties that ensure the trust is executed faithfully and in line with the intentions of the person who created it. Some of the fundamental responsibilities include:

• Execution of the Trust (Section 11): Trustees must carry out the purpose of the trust as stated by the settlor. They are required to follow the directions laid out in the trust instrument, except when these are impossible, illegal, or clearly harmful to the beneficiaries.
• Protection and Preservation of Trust Property (Sections 13-15): Trustees must take all reasonable steps to preserve the trust assets. This includes maintaining legal title, defending ownership in courts if necessary, and ensuring the property is not misused or misappropriated. They are expected to handle the property as carefully as they would their own.
• Impartiality Among Beneficiaries (Section 17): When there are multiple beneficiaries, trustees must remain neutral and act fairly. They should not favor one beneficiary over another unless the trust deed specifically allows them to do so.
• Providing Accounts and Information (Section 19): Trustees must keep accurate and up-to-date records of all trust-related transactions. Upon request, they are obligated to provide beneficiaries with full and accurate information regarding the trust property, including accounts and documentation.

These duties collectively form the backbone of a trustee’s fiduciary obligations and are designed to build and preserve the beneficiaries’ confidence in the trust arrangement.

Powers of Trustees (Chapter IV)

While trustees have heavy responsibilities, they are also granted a broad range of powers under the Act to help them effectively administer the trust. These powers, unless restricted by the trust instrument, include:

• Power to Sell, Mortgage, or Lease Trust Property: Trustees may dispose of trust assets if doing so aligns with the trust’s purpose. They can sell property in whole or in part, by public auction or private negotiation, and mortgage or lease it as needed.
• Power to Compound and Settle Debts: Trustees are empowered to settle outstanding debts related to the trust. They can accept compromises, extend repayment periods, or even abandon claims, as long as these decisions are made in good faith and serve the trust’s interests.
• Right to Settle Accounts: Once a trustee has fulfilled their obligations, they are entitled to have their accounts formally reviewed and closed. This provides legal protection and finality to their role.
• Power to Seek Court Directions (Section 34): If a trustee faces uncertainty regarding the administration of the trust, they may approach the principal Civil Court for guidance. This ensures trustees are not penalized for acting prudently in complex situations and encourages transparency.

In addition to these, trustees also have powers to vary investments, give receipts, apply trust property for the benefit of minors, and handle other administrative tasks, provided these actions are in line with the trust’s objectives and the law.

Rights and Liabilities of Beneficiaries

The Indian Trusts Act, 1882, not only outlines the duties of trustees but also provides a comprehensive framework for the rights and responsibilities of beneficiaries. A beneficiary, being the person for whose benefit the trust is created, holds a special position under the law.

Right to Enjoy Trust Property and its Benefits (Sections 55 to 56)

Beneficiaries are entitled to the rents, profits, and other advantages generated from the trust property. If a property under trust yields income, such as rent from real estate or interest from investments, the beneficiary has a clear legal right to receive that income as intended by the trust’s author.

Moreover, where the terms of the trust are specific about how and when the trust property should be executed for the beneficiary’s advantage, the beneficiary can demand specific execution of those intentions. This means that the trustee is bound to act in accordance with the trust’s purpose and ensure that the beneficiary receives the benefits that were promised.

Additionally, in cases where there is only one beneficiary, and that person is legally competent, or where there are multiple beneficiaries who are all in agreement and capable of contracting, they can collectively demand that the trustee transfer the trust property directly to them. This transfer would effectively end the need for a trustee, as the beneficiaries take over possession and management of the property.

Right to Transparency and Information (Section 57)

Trusts operate on fiduciary responsibility, which means that transparency is vital. Beneficiaries have the legal right to inspect all key documents associated with the trust. This includes:

• The original instrument of trust.
• Title documents related to the trust property.
• Financial records such as accounts and ledgers.
• Any legal opinions or advice that the trustee has sought concerning trust management.

This right ensures that beneficiaries can monitor how the trust is being administered and whether the trustee is fulfilling their obligations honestly and effectively. It also empowers them to take action if any mismanagement or fraud is suspected.

Right to Transfer Their Beneficial Interest (Section 58)

The law allows beneficiaries who are competent to contract to transfer their beneficial interest in the trust. This could mean selling, gifting, or otherwise assigning their right to receive benefits from the trust to another person.

However, this right is subject to certain limitations. For example, if a married woman is the beneficiary and the trust was created in such a way that she cannot dispose of her interest, then she is not permitted to transfer it during her marriage. Such protective provisions are often included to safeguard vulnerable beneficiaries from exploitation or coercion.

Right to Legal Recourse and Enforcement (Sections 59 to 61)

If a trustee fails to perform their duties, either through negligence, breach of trust, or refusal to act, the beneficiary has the legal standing to sue for the execution of the trust. This includes situations where:

• No trustee was ever appointed.
• The trustee has died, resigned, or been removed.
• The trustee is unwilling or unable to perform their functions.

In such cases, the beneficiary can approach the court to have the trust executed, either by appointing a new trustee or by overseeing the execution directly through judicial intervention.

Furthermore, beneficiaries can compel trustees to take specific actions required under the trust or stop them from doing something that would harm the trust property. For example, if a trustee is about to sell trust property at an undervalued rate or in violation of the trust terms, the beneficiary can seek a court injunction to prevent the sale.

Liability of the Beneficiary in Certain Situations (Section 68)

While beneficiaries enjoy significant protections and rights, the Act also holds them accountable in cases where they are complicit in wrongdoing. If a beneficiary:

• Actively participates in a breach of trust,
• Gains personally from a wrongful act done by the trustee,
• Is aware of a breach and fails to report or act to prevent it,
• Induces the trustee to act dishonestly or negligently,

Then they can be held liable. In such cases, their beneficial interest in the trust may be seized or withheld until the loss caused by the breach is compensated. The law ensures that beneficiaries cannot use the shield of the trust to unjustly enrich themselves or encourage mismanagement.

However, there are exceptions. For instance, if the beneficiary is a married woman whose beneficial interest is protected in a way that she cannot alienate it during her marriage, her interest may not be impounded even if she participated in a breach of trust, depending on how the trust is structured.

Extinction of Trusts (Section 77)

A trust, by its very nature, is not intended to be perpetual unless specifically structured to be so. The Indian Trusts Act, 1882, recognizes this and lays down clear conditions under which a trust comes to an end. According to Section 77, a trust is considered extinguished under the following circumstances:

1. Fulfilment of Purpose: The most straightforward way in which a trust can come to an end is when its purpose has been fully achieved. For instance, if a trust is created to fund the education of a particular child until graduation, the trust is naturally extinguished once that goal is accomplished.
2. Unlawfulness of Purpose: A trust may also cease to exist if its purpose becomes unlawful. What begins as a legitimate objective may, over time, fall afoul of legal changes or public policy. For example, if a trust was created for a business venture that later becomes banned or regulated in a way that prohibits continuation, the trust can no longer function and is thus extinguished.
3. Impossibility of Performance: Sometimes, circumstances arise that make the execution of the trust’s objectives practically or legally impossible. This could occur due to destruction of the trust property (like a building being destroyed in a natural disaster), loss of necessary documentation, or other unforeseen events that render the trust’s purpose unachievable.
4. Revocation of the Trust: Finally, a trust may also be extinguished if it is revoked by the author or by lawful means permitted under the Act. However, revocation is a more nuanced area and is elaborated in the sections that follow.

Revocation of Trusts (Sections 78 and 79)

Revocation is the act of legally withdrawing or canceling a trust. While it might seem straightforward, the Indian Trusts Act places certain limitations and conditions on how and when a trust can be revoked, ensuring that the rights of beneficiaries are protected and that trustees are not unjustly undermined.

There are several scenarios in which revocation is legally permissible:

1. Consent of All Competent Beneficiaries: If all the beneficiaries of a trust are legally competent, that is, they are of sound mind and of the age of majority, they can collectively agree to revoke the trust. This must be a voluntary and informed decision, made without coercion or undue influence.
2. Express Reservation of Revocation Power: Sometimes, the author of a trust explicitly reserves the right to revoke it in the trust deed itself. This reserved power must be clearly stated in the instrument of trust. If such a provision exists, the author may revoke the trust unilaterally, subject to the terms and conditions mentioned.
3. Debt Trusts Not Communicated to Creditors: A special case arises when a trust is created for the repayment of the settlor’s debts, but this arrangement has not been disclosed to the creditors. In such cases, the settlor retains the right to revoke the trust. However, if the creditors are informed and have acted in reliance on the trust, revocation is no longer permitted without their consent.

Limitation on Revocation (Section 79)

Even when a trust is revoked according to the law, the revocation does not invalidate any legitimate actions already carried out by the trustees. The trustees may have taken several steps, selling property, investing trust funds, and paying out to beneficiaries in good faith and within their authority. These actions remain valid and cannot be undone merely because the trust is later revoked.

This provision serves to protect not only the trustees who acted responsibly but also third parties who may have engaged in transactions based on the trustees’ actions. It reinforces the principle that revocation cannot retroactively affect completed and lawful exercises of trust functions.

Bottom Line

A trust, as defined under Section 3 of the Indian Trusts Act, 1882, is a legal relationship in which one party (the trustee) holds property for the benefit of another (the beneficiary), based on confidence placed by the person creating the trust (the settlor or author). It creates a fiduciary obligation on the trustee to manage and deal with the trust property by the terms set out in the instrument of trust.

The trust is established when five essential elements are present:

1. In the intention to create a trust
2. A lawful purpose,
3. An identifiable beneficiary
4. Defined trust property, and
5. A competent trustee.

For immovable property, the trust must be created by a written, signed, and registered document. For movable property, the trust may also be created by transferring possession to the trustee.

Section 6 outlines that the trust comes into being when these requirements are met with reasonable certainty, ensuring clarity and enforceability. Trusts are most commonly used for managing assets, estate planning, providing for dependents, or charitable purposes.

The Indian Trusts Act does not apply to public or religious trusts but governs private trusts exclusively. Trustees are legally bound to act in good faith, protect the trust property, and serve the interests of beneficiaries. Any breach of these duties can lead to legal liability.

In essence, a trust is a legally binding mechanism to transfer and manage property with accountability, ensuring that the intended beneficiaries receive the benefits as per the settlor’s wishes, safeguarded by the trustee’s fiduciary responsibility.

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