Dissolution of a Private Trust

INTRODUCTION

A Private Trust can have a broad definition but has been defined in a niche manner under Section 3 of the Indian Trust Act, 1882. It has been defined as an obligation that is attached to property ownership, and arises out of a confidence. That is accept by the owner, or declare and accepted by the owner. For the benefit for some other person, or some other person as well as the owner.

This means that Private Trust is create for the benefits of persons who are identify, who could be ascertainable individuals.

ESSENTIAL FACTORS FOR THE CREATION OF A PRIVATE TRUST

• The Private Trust must be lawful, which means that it should not be established as fraudulent. It should not be oppose to public policy. Also should not involve any injury to any other person, and should not be oppose to the law.
• The property under the trust must be of actuality and must be unequivocal.
• The owner of the Trust must not be in control of the property of the trust; after handing it over to the trustee.
• The trustee must avoid using the property of the trust for benefits of his own; instead he must use it for the specified beneficiary.
• The owner or the author of the trust must have intentions that are unambiguous and absolute; and it must be convey in an effective manner to the trustee by will or by any other written instrument. In the case of any immovable property, an instrument that is of non-testamentary nature must be sign by the settlor in order to make it a  valid trust. And in case it is a movable property, the transfer of the property should ensure the creation of a trust.
• The beneficiary must be mention and specified properly.
• The purpose of the creation of the trust must be certain.
• If there is a part of the trust that is deem lawful and the other part of the trust is deem unlawful. The trust would be consider unlawful as a whole.

DISSOLUTION OF A TRUST

There arises several reasons to dissolve a trust and trusts also have an expiry date. Any Private trust can be dissolve as per the existing laws in the given circumstances:

• Consent from all the Beneficiaries: The beneficiaries relinquish their rights by signing the documents that release them from the trust.
• By the Settlor: The person who initially transfer the property and led to the creation of the trust (the settlor) provide that there were powers of revocation that are reserve by him as per the trust deed. This person may exercise his powers and revoke the trust by registering a deed for revocation.
• The Period/Passage of Time: The trust instrument mentions a period of time for which a trust is to operate. A settlor can inform that the trust can last until the beneficiary attains a certain age. If this period expires, then the trust would get dissolved.
• Due to a Particular Event: The beneficiaries can choose to end a trust as a result of an event happening. For example, the consequent failure of satisfying the purposes of the trust or halting and cessation of circumstances; for which the trust create in the first hand.
• Avoidance of Transactions: This may be set aside under certain provisions that relate to the avoidance of transactions and at some undervalue and any fraud of creditors’ disposition that has been induced by duress, undue influence, fraud, or mistake.
• Exercising Power of Advancement: The trustees exercise an advancement power or an appointment power that would terminate the trust in a way that whole or in part.
• Fulfillment of Purpose: When the purpose of the trust for which it create remains fulfill, for example, if a settlor has stipulate that the trust would last till the marriage of the beneficiary then the trust would be deemed to be dissolving once the marriage is solemnized.
• Destruction of the Trust Property: This occurs when the fulfillment of the trusts’ purpose becomes obstructed and impossible by destroying the trust property or otherwise.
• Unlawful Purpose: When the purpose of the whole trust or part of the trust becomes corrupt and unlawful. This is describe under Section 4 of the Indian Trust Act, 1882, the purpose of the trust is unlawful if:
  • It has been forbidden by the express or imply provisions of law
  • The purpose is of such a nature that if this becomes permitted then it would defeat the provisions of Law.
  • If it is fraudulent.
  • If it involves or seeks to imply injury to the property of a person or the person himself.
  • Also if the Court has regarded it to be immoral and opposed to the public policy. Therefore, if the purpose of the trust becomes unlawful with regards to the provisions of Section 4 of the Indian Trust Act, then the trust would get extinguished.