Trusts — Definition, Parties & Creation — Transfer of Property Notes

Trust — Definition, Essentials and Comparison

When a father hands money to a friend saying “hold this for my son until he is 25,” he does not make the friend the owner in any real sense — the friend must use it for the son. The law calls this arrangement a trust, and it has guarded such “confidences” for centuries through the courts of equity.

What is a Trust? (Section 3, Indian Trusts Act)

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.

The vocabulary (all from s.3):

The author of the trust (settlor) — the person who reposes the confidence and creates the trust.
The trustee — the person who accepts the confidence and holds the legal title.
The beneficiary (cestui que trust) — the person for whose benefit the confidence is accepted.
The trust-property (trust-money) — the subject-matter.
The beneficial interest — the beneficiary’s right against the trustee.
The instrument of trust — the document, if any, declaring the trust.

Essentials of a valid trust:

A lawful purpose (s.4) — not forbidden by law, fraudulent, or against public policy.
An author competent to create it (s.7).
A trustee capable of holding property (s.10).
A beneficiary (s.9), certain and identifiable.
Trust-property — transferable property vested in the trustee (s.8).
A clear declaration/intention to create a trust.

Trust distinguished from allied relationships (comparison):

Debt — a debtor owns the money and merely owes an equal sum; a trustee does not own beneficially — he holds specific property for the beneficiary, who can trace it.
Bailment — a bailee gets possession of goods for a purpose but no title; a trustee gets title and holds it for the beneficiary. Bailment is only of movable property; a trust may be of any property.
Agency — an agent acts for and represents the principal and creates legal relations for him; a trustee holds title and deals with the property in his own name, not as a representative. An agent takes instructions; a trustee is bound by the trust terms.
Contract — a contract creates rights in personam by agreement for consideration; a trust creates an equitable obligation annexed to property and needs no consideration. The beneficiary need not be a party to any contract.

Section 3, Indian Trusts Act 1882: “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.”

In Simple Terms: A trust is a duty tied to the ownership of property: the trustee holds the title but must use the property for the beneficiary. It differs from a debt (a debtor owns the money), a bailment (a bailee only has possession), an agency (an agent represents, does not hold title) and a contract (a trust needs no consideration and binds the conscience of the owner).

🧩 WORKED EXAMPLE — trust or bailment?

Facts. X hands his friend Y a sum of money “to hold and invest for my daughter D until she turns 21.”

Rule. A trust arises where an obligation is annexed to the ownership of property held for a beneficiary (s.3); bailment is a mere delivery of goods for a purpose without title.

Apply. Y takes the money to hold and invest for D’s benefit, with D as beneficiary — an obligation annexed to Y’s holding of the property. This is a trust, not a bailment (which passes no beneficial holding for a third person).

Conclusion. Y is a trustee for D; D is the beneficiary and can enforce the trust.

flowchart TD
    A["Author/Settlor"] --> B["Trustee (holds legal title)"]
    B --> C["Trust-property"]
    B --> D["Beneficiary (cestui que trust) — beneficial interest"]
    C --> D
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D box;

Case Laws

Official Trustee v Sachindra Nath Chatterjee (1969) — a trust is an obligation annexed to ownership; the trustee holds legal title for the beneficiary and cannot deal with the trust otherwise than the deed permits.
The trust-versus-debt line (s.3): a debtor owns the money and merely owes an equal sum, while a trustee holds specific property for the beneficiary, who can trace it — so a trust is not a debt.

Creation of a Trust

Not every loose wish creates a trust. “I hope my son will look after his sister” is a hope, not a trust. The law demands certainty — of intention, of what is given, and of who benefits — before it will hold a person to the strict duties of a trustee.

How a Trust is Created (Sections 5–6)

To create a valid private trust, the author must satisfy the three certainties and the required formalities:

Certainty of intention — the author must indicate with reasonable certainty an intention to create a trust (not a mere wish or moral obligation).
Certainty of purpose/subject — the purpose of the trust and the trust-property must be certain.
Certainty of beneficiary — the beneficiary must be certain and identifiable.

Section 6 requires that the author indicate with reasonable certainty (a) an intention to create a trust, (b) the purpose, (c) the beneficiary, and (d) the trust-property, and (unless the author is himself the trustee) transfer the trust-property to the trustee.

Formalities (Section 5):

A trust of immovable property is valid only if declared by a non- testamentary instrument in writing signed by the author (or the trustee) and registered, or by the author’s will.
A trust of movable property is valid if declared as above or by transferring the ownership of the property to the trustee.

The author must be competent (s.7), the trustee capable of holding property (s.10), the purpose lawful (s.4), and the property transferable (s.8).

Section 6, Indian Trusts Act: “Subject to the provisions of section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts (a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee.”

In Simple Terms: A trust is created only when the author makes clear — by words or acts — that he intends a trust, and fixes the purpose, the beneficiary and the property, then hands the property to the trustee. For land, this must be by a registered written deed (or a will); for movables, by a deed or by transferring the property.

🧩 WORKED EXAMPLE — creating a trust of a house

Facts. A wants his house held for the education of his grandchildren. He executes a registered deed declaring the trust, naming T as trustee, the house as trust-property, and the grandchildren as beneficiaries, and transfers the house to T.

Rule. Sections 5–6 — a trust of immovable property needs a registered written instrument, the three certainties, and transfer of the property to the trustee.

Apply. Intention, purpose (education), beneficiaries (grandchildren) and property (the house) are all certain; the deed is registered and the property transferred to T.

Conclusion. A valid trust is created; T holds the house for the grandchildren’s education.

flowchart TD
    A["Creation of trust (ss.5-6)"]
    A --> B["Three certainties: intention + purpose/property + beneficiary"]
    A --> C["Lawful purpose (s.4); competent author (s.7); capable trustee (s.10)"]
    A --> D["Form: immovable = registered deed or will; movable = deed or transfer of ownership"]
    A --> E["Transfer trust-property to trustee"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D,E box;

Case Laws

The three-certainties rule (ss.5–6): a trust is created only where the author shows, with reasonable certainty, an intention to impose an enforceable obligation, plus certainty of purpose, beneficiary and property — a mere wish or moral exhortation is not enough.

Kinds of Trusts

Trusts come in many shapes — some spelled out in a deed, some read in by the courts to prevent unjust enrichment, some for a family, some for the public at large. Sorting them is half the battle in the exam.

Classification of Trusts

Trusts are classified along several lines:

By beneficiary — private and public trusts. A private trust is for ascertained individuals (a family, named persons) and is governed by the Indian Trusts Act. A public trust is for the benefit of the public or a section of it (a religious or charitable purpose) — e.g. a temple, a school, a hospital fund — and is governed by general law and statutes like the public and charitable/religious endowment Acts.
By mode of creation — express, implied, constructive/resulting.
- Express trust — created by the clear words or acts of the author.
- Implied trust — inferred from the presumed intention of the parties (e.g. where circumstances show a trust was intended though not stated).
- Constructive (or resulting) trust — imposed by law, irrespective of intention, to prevent unjust enrichment (e.g. where a person acquires property in circumstances that make it unconscionable for him to keep it beneficially; Chapter IX of the Act deals with such “obligations in the nature of trusts”).
Charitable and religious trusts — public trusts for objects such as relief of poverty, education, medical relief, advancement of religion, or other objects of general public utility.
Precatory trust — one created by words of prayer, wish or recommendation (“I request,” “in full confidence that…”). It is a trust only if the words show a real intention to impose a binding obligation, with certainty of subject and object; otherwise they are mere moral exhortations and create no trust.
Executed and executory trusts; simple and special trusts — an executed trust is completely declared; an executory trust needs a further instrument; a simple (bare) trustee merely holds, while a special trustee has active duties.

Note on public versus private (illustrative): a temple or a public library fund is a public trust (beneficiaries are the public); a fund for “my children” is a private trust (beneficiaries are ascertained individuals).

In Simple Terms: Trusts split by who benefits (private for named persons, public for the community) and by how they arise (express by words, implied from intention, constructive imposed by law to prevent unfairness). A precatory trust depends on prayerful words — binding only if a real obligation was intended.

🧩 WORKED EXAMPLE — is a temple fund a public trust?

Facts. A endows a fund “for the maintenance of the village temple and its worshippers.”

Rule. A trust whose beneficiaries are the public or a section of it (here, the worshippers at large) is a public (religious/charitable) trust.

Apply. The beneficiaries are not ascertained individuals but the general body of worshippers — a section of the public.

Conclusion. It is a public religious trust, governed by the general law of religious/charitable endowments, not merely the private-trust provisions.

flowchart TD
    A["Kinds of trusts"]
    A --> B["By beneficiary: Private / Public (charitable, religious)"]
    A --> C["By creation: Express / Implied / Constructive-resulting"]
    A --> D["Precatory: prayer words — trust only if binding intention"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D box;

Case Laws

Commissioner, Hindu Religious Endowments v Sri Lakshmindra Thirtha Swamiar (1954) — a public trust is one whose beneficiaries are the public or a section of it, as distinct from a private trust for ascertained individuals.
Lambe v Eames (1871) — precatory words (prayer, wish, recommendation) create a trust only where a binding obligation, with certainty of subject and object, is intended; otherwise the donee takes absolutely.

Appointment of Trustees

A trust must always have a trustee — “equity will not allow a trust to fail for want of a trustee.” So the law provides ways to fill the office when the original trustee dies, refuses, or steps down.

Appointment of New Trustees (Sections 73–74)

Who may be a trustee (s.10). Every person capable of holding property may be a trustee; but where the trust involves the exercise of discretion, the trustee must be competent to contract. No one is bound to accept a trust — but once accepted, it cannot be renounced (s.10, s.46).

Appointment of a new trustee (Section 73). A new trustee may be appointed to fill a vacancy where a trustee: (i) dies, (ii) is absent from India for six months, (iii) leaves India to reside abroad, (iv) is declared insolvent, (v) disclaims the trust, (vi) is discharged, or (vii) refuses or becomes unfit or incapable to act. The power to appoint is exercised by: the person nominated in the trust-instrument for that purpose; if none, the author (if alive) or the surviving/continuing trustees or the legal representative of the last trustee.

Appointment by the court (Section 74). Where a new trustee cannot be appointed under s.73 (no person able and willing to appoint), a court may, on application, appoint a trustee and vest the trust-property in him. The court is guided by the wishes of the author and beneficiaries and the interests of the trust.

Every new trustee has the same powers, authorities and discretions as if originally appointed.

Section 73 (part), Indian Trusts Act: “Whenever any person appointed a trustee disclaims, or any trustee … dies or is for a continuous period of six months absent from India, or leaves India for the purpose of residing abroad, or is declared an insolvent, or desires to be discharged … or refuses or becomes, in the opinion of a principal Civil Court of original jurisdiction, unfit or personally incapable to act … a new trustee may be appointed in his place…”

In Simple Terms: When a trustee dies, leaves the country for long, goes bankrupt, refuses or becomes unfit, a new trustee is appointed — by whoever the deed names for the job, or else by the author or the continuing trustees; and if no one can, by the court. The trust never fails just because it lacks a trustee.

🧩 WORKED EXAMPLE — filling a vacancy

Facts. The sole trustee T of a family trust dies. The trust-deed names P as the person to appoint new trustees.

Rule. Section 73 — on a trustee’s death a new trustee may be appointed, by the person nominated in the instrument for that purpose.

Apply. T’s death creates a vacancy; the deed nominates P to appoint.

Conclusion. P appoints a new trustee, who takes over T’s powers; if P could not or would not, the court could appoint under s.74.

flowchart TD
    A["Vacancy: death/absence/insolvency/disclaimer/unfitness (s.73)"]
    A --> B["Appointer: person nominated in deed"]
    B --> C["else author (if living) / continuing trustees / legal rep"]
    C --> D["else Court appoints (s.74)"]
    classDef box fill:#e8f0fe,stroke:#333,color:#111;
    class A,B,C,D box;

Case Laws

The rule of s.73 — a new trustee is appointed on a vacancy by the person named for the purpose or the continuing trustees; equity will not let a trust fail for want of a trustee.

📄 Full notes + Question Bank (₹199) — every topic in depth, model answers to all past KSLU questions, in one printable PDF. Get the bundle · 10 Solved Problems · All Transfer of Property topics