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    Friday, 31 March 2017

    Creation of Trust and Essentials of valid Trust

    1. INTRODUCTION
    The rules relating to trusts are contained in the Trusts Act 1882. It came into force on 1st day of March 1882 and extends to the whole of Pakistan. The Trusts Act 1882 deals with private trusts. It does not discuss the rules of Islamic Law relating to waqaf. A trust is purely equitable obligation and is enforceable only in a court in which equity is administered. The most distinctive feature of a trust is that it is not issuing out of the land but as thing collateral to it. It is not a Jus in for it is not a legal property.

    2. RELEVANT PROVISIONS
    Sec. 3, 4, 5 6. 7 of Trusts Act

    3. DEFINITIONS
    I. BLACK LAW DICTIONARY
    Trust is a right of proper, real or personal, held by one party for the benefit of other. It is a confidence reposed in one person, who is termed trustee, for benefit of another, who is called cestui que trust.

    II. DR. UNDERHILL
    A trust is an equitable obligation, either expressly undertaken or constructively imposed by the court, where by the obligator is bound to deal with property over which he has control for the benefits of persons of which he may or may not himself he one and anyone of whom may enforce the obligation.

    III. DR. MATT LAND
    A trust enforced when a person has rights which he is bound to exercise:

    i. On behalf of another, or
    ii. For accomplishment of some particular purpose
    He is said to have those rights in trust or for that "purpose" and he is called a trustee.

    IV. TRUST ACT 1882
    According to Sec. 3 a trust is an obligation annexed to the ownership of the property and arising out of a confidence reposed in and accepted by the owner and declare and accepted by him, for the benefit of another and the owner.

    4. KINDS OF TRUST
    Kinds of trust are as under
    i. Constructive Trust
    ii. Executed Trust
    (iii) Private Trust
    (iv) Public Trust or Charitable
    (v) Expressed Trust
    (vi) Secret Trust
    (vii) Executory Trust
    (viii) Implied Trust

    5. PARTIES OF TRUST
    i. Trustee
    The person who accepts the confidence is called a trustee.

    (ii) Author
    The person who reposes or declares confidence is called author of the trust.

    (iii) Beneficiary
    The person for whose benefit the confidence is accepted is called the beneficiary.

    6. TRUST PROPERTY
    The subject matter of the trust is called trust property.

    7. INSTRUMENT OF TRUST
    The instrument by which the trust is declared is called the instrument of trust.

    8. WHO MAY CREATE A TRUST
    (i) By every person competent to contract.

    (ii) With, the permission of a principal civil court or original jurisdiction, by or on behalf of a minor.

    9. DECLARATION OF A TRUST
    A trust regarding immoveable property is not valid unless it is declared by a non-testamentary instrument in writing signed by the author of the trust, or the trustee and, registered or by the will of the author or of the trustee. Similarly a trust regarding moveable property is not valid unless it is declared as aforesaid or unless the ownership of property is transferred to the trustee.

    10. CREATION OF TRUST
    According to Sec. 6 a trust is created when the author of the trust indicates with reasonable certainty by words or acts.

    (i) An intention on his part he creates it.
    (ii) The purpose of a trust.
    (iii) The beneficiary.
    (iv) The trust property

    11. REQUISITES OF A VALID TRUST
    Requisites of a valid trust are as under:
    (i) The intention of the author of the trust.
    (ii) The beneficiaries.
    (iii) Lawful purpose of the trust.
    (iv) Subject matter.
    (v) Transfer of possession of trust property.

    12. PURPOSE OF TRUST
    According to Sec 4, a trust may be mated for lawful purpose. If the purpose is unlawful, it is void.

    13. RULE OF CERTAINTY
    Following are rule of certainty:
    (i) Certainty of words.
    (ii) Certainty of subject matter.
    (iii) Certainty of object.

    14. UNLAWFUL PURPOSES OF TRUST
    Following purposes of a trust are unlawful. Forbidden by Law
    I. If it is forbidden by law, the purpose will be unlawful.
    II. Fraudulent
    If it is fraudulent.
    III. Against Provision of any Law
    It would defeat the provisions of any law.
    IV. Involves any Injury
    If it involves or implies any injury to the person or property of author.
    V. Immoral
    If it is regarded by the court as immoral.
    VI. Against Public Policy
    If it is regarded by the court as opposed to public policy.

    15. EFFECT OF UNLAWFUL PURPOSE 0R OBJECT
    If purpose of trust is not lawful. It is absolute void.
    I. In case of two Purposes
    Where two purposes are so interconnected that they cannot be separated, the whole trust shall become void.

    16. CONCLUSION

    To conclude I can say that the trust is defined as that relation between two persons by virtue of which one of them holds property for benefit of the other, or as an equitable right, title or interest in property, real or personal, distinct from the legal ownership thereof. A trust can only be created for a lawful purpose. If purpose of trust is unlawful, it is void.
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    Item Reviewed: Creation of Trust and Essentials of valid Trust Rating: 5 Reviewed By: Usman Ali
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