How is a private trust dissolved?

The Indian Trusts Act, 1882 is related to private trusts and trustees. Under section 3 of the 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, i.e. A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be revocable or irrevocable. A trust whose cancellation is not possible after it goes into effect is known as an irrevocable trust. In a revocable trust cancellation is possible during the lifetime of the author. A trust is called a Private Trust when it is constituted for the benefit of one or more individuals who are, or within a given time may be, definitely ascertained.

Section 77 and 78 under chapter VII talk about the dissolution of a trust.

Under section 77, A trust is extinguished-

(a) when its purpose is completely fulfilled and if a certain period is mentioned in the trust instrument, then trust shall end after the expiry of such period.

(b) when its purpose becomes unlawful. Every trust of which the purpose is unlawful is void Under section 4 a trust will become unlawful when it is-

a) Forbidden by law,

b) Is of such a nature that, if permitted, it would defeat the provisions of any law,

c) Is fraudulent,

d) Involves or implies injury to the person or property of another,

e) The court regards it as immoral or opposed to public policy.

(c) when the trust-property is destroyed and the fulfilment of the purpose of the trust becomes impossible.

 (d) when the trust, being revocable, is expressly revoked.

Under section 78, A trust created by will may be revoked at the pleasure of the testator. (testamentary instrument). A trust otherwise created can be revoked when:

(a) where all the beneficiaries are competent to contract (sui juris) and with their consent the trust can be revoked. The beneficiaries sign the documents of the release of the said trust by relinquishing their rights.

(b) where the trust has been declared by a non-testamentary instrument (called living trusts or inter vivos trusts. These are trusts created during the life of the grantor; they are effective when created or upon the occurrence of a specific event stated within the trust document) or by word of mouth and the trust can be revoked in exercise of a power of revocation expressly reserved to the author of the trust.

 (c) where the trust is for the payment of the debts of the author of the trust, and has not been communicated to the creditors, the trust can then be revoked at the pleasure of the author of the trust.

Illustration: A conveys some property to B in trust to sell the same and pay out of the proceeds the claims of A’s creditors. If no communication has been made to the creditors, A may revoke the trust, but if the creditors are parties to the arrangement, the trust cannot be revoked without their consent.

By: The Admin.

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