Lesson 2 of 3 · 8 min
Three roles, and a split down the middle
A trust separates who owns property from who benefits from it. The Indian Trusts Act, 1882 names the three roles and sets out what it takes to create one.
You want your flat to end up with your disabled sister, but she cannot manage a flat. So you hand it to your brother, who is bound to hold it and run it for her. Ownership and benefit have been pulled apart on purpose, and that separation is the entire device.
The Indian Trusts Act, 1882 says the same thing in Victorian English — an obligation annexed to the ownership of property, arising out of a confidence reposed in and accepted by the owner, for the benefit of another — and it names the three roles.
The person who puts the property in is the AUTHOR OF THE TRUST, whom everybody calls the settlor. The person who takes it and manages it is the TRUSTEE. The person it is all for is the BENEFICIARY.
Match them up
Who is who inside a trust
Pick a role, then pick what it actually does.
Pick a term on the left.
Is that a real thing, or a film plot?
KabirTara
Kabirasking
A friend told me rich families just put everything in a trust and then nobody can fight over it. Is that an actual thing in India, or is it something films made up?
Taraexplaining
It is real, and it is old — the Indian Trusts Act is from 1882. But it is not a vault you hide things inside. You hand your property to somebody else to hold, under written instructions, for people you name.
Kabirasking
Hand it over? So it stops being mine?
Taraexplaining
That is the whole mechanism. The trustee becomes the legal owner. The beneficiary gets the benefit. Two different people, deliberately — which is something a nomination form cannot do, because that only says who a bank pays out to.
Kabirasking
Then what stops the trustee walking off with the lot?
Taraexplaining
The instructions, and the duties the Act puts on a trustee, which they can be taken to court over. It is also why this costs real money to draft and to run, every year. Most families never go near one.
Wanting a trust does not create one. Section 6 says the author must indicate, with reasonable certainty, four things: an intention to create a trust, the purpose of the trust, the beneficiary, and the trust-property — and then transfer that property to the trustee.
Section 5 adds the form. A trust of immovable property is valid only where it is declared by a written instrument signed by the author or the trustee AND registered, or where it is made by a will. For movable property, that same declaration or an actual transfer to the trustee will do.
The Act's own illustrations show how easily this collapses: leaving property to someone 'hoping he will continue it in the family' creates no trust, because no beneficiary is named with reasonable certainty.
Put these in order
Put the making of a private trust into a sensible order.
- Transfer the property to the trustee, who accepts it
- Register it, where immovable property is involved
- Have the instrument of trust drafted and signed
- Choose a trustee who will still be around in twenty years
- Identify exactly which property is going into it
- Decide what the trust is for, and who it is for
Quick check
Ravi signs a deed saying his flat is held on trust for his younger brother, but never registers it and never transfers anything. What has he created?
Check yourself
1 / 3
Kabir asks
The Indian Trusts Act names three roles inside a trust. Which three?
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