Trust

What are the Duties & Responsibilities of a Trustee in a Trust Registration?

calendar05 Nov, 2022
timeReading Time: 5 Minutes
What are the Duties & Responsibilities of a Trustee in a Trust Registration?

Section 3 of the Trust Act, 1882, defines a Trust as “an obligation annexed to the property ownership & arising out of a confidence reposed in & accepted by the owner/settlor, or declared & accepted by him, for the benefit of the owner.” It involves the transfer of a property or assets from one party to another for the purpose of benefitting a third party, or of a third party alongside the Trustee, i.e. the person the property has been trusted to. A Trust Registration is, hence, the process of legalising the trust deed, i.e. the contract between the settlor and the Trustee. Scroll down to check the Duties & Responsibilities of a Trustee in a Trust Registration.

Who can be a Trustee in a Trust Registration?

Any individual or corporate body or corporate sole that is capable of holding property and competent to contract can be named as a Trustee

Accepting a Trust

A trust can be accepted through any words by the Trustee indicating their acceptance with reasonable certainty. No one is obligated or legally bound to accept a trust. A Trustee may also, within a reasonable period, disclaim a trust instead of accepting it. The disclaimer would prevent the trust property from vesting in them. 

Duties & Responsibilities of a Trustee – A Brief

The following are the duties & responsibilities of a Trustee:

  • A Trustee is legally bound to fulfil the Trust’s purpose. They must obey the directions of the author of the trust that were given at the time of its creation, with the exception of any modifications made with the consent of all the beneficiaries being competent to contract. In a situation where the beneficiary is incompetent to contract, consent may be given on their behalf by a principal Civil Court of original jurisdiction. A Trustee is not bound to follow any such directions when doing so would be illegal, impracticable, or injurious to the beneficiaries.
  • This is one of the known duties & responsibilities of a Trustee in a Trust Registration. A Trustee is responsible for ensuring they are well informed on the state of the trust-property. They are bound to acquaint themselves with the nature and circumstances of the trust property as soon as possible. Where necessary, they are bound to obtain a transfer of the trust property to themselves, and to invest the in-trust money into sufficient or hazardous security.
  • A Trustee must maintain and defend all such suits and take any necessary measures, keeping in mind the nature and amount or value of the trust-property, for the preservation of the trust-property & the assertion/protection of the title.
  • A Trustee must not set up a title adverse to the beneficiary, either for themselves or for another set-up. 
  • A Trustee is required to deal with the property covered within the trust as carefully as one of ordinary prudence would their own property. Given that there is no such clause in the contract that specifies otherwise, a Trustee is not responsible for the loss, deterioration, or destruction of the property.
  • In a situation where the trust is created to benefit several persons in line of succession, and the property is either wasting in nature, or a future/reversionary interest, the Trustee is required to convert the property into one of a permanent and immediately profitable nature.
  • In situations involving more than one beneficiary, a Trustee must remain impartial and not execute the trust in a manner that benefits one beneficiary at the cost of the other. 
  • In a situation where the trust is created to benefit several persons in succession and one person is in possession of the same, the Trustee is bound to take preventative measures if the person in possession commits, or threatens to commit, destructive or injurious acts. 
  • A Trustee is required to not only maintain clear and accurate accounts of the trust- property but to also provide accurate information pertaining to the amount & state of the trust property in full at the behest of the beneficiary.
  • This is also one of the known duties & responsibilities of a Trustee, If the trust-property consists of money that either cannot be applied immediately or at an earlier date to the objective of the trust, the Trustee must then invest the money into only the following securities- promissory notes, debentures, stock or other securities; bonds, debentures and annuities;
    • in stock or debentures of/shares in, Railway or other Companies where the interest has been guaranteed by the Indian Secretary of State;
    • in debentures/other securities for money issued;
    • on a first mortgage of immovable property situate;
    • on any other security authorised by the instrument of trust
  • In the scenario that the Trustee is directed to sell the trust property within a given amount of time and does not make the sale until past specified time-frame, unless this extension has been authorised by a principal Civil Court of original jurisdiction, they must then be responsible to prove that the beneficiary has not been prejudiced by this extension.
  • If a Trustee commits a breach of trust, they are then liable to make good on any losses sustained by either the trust-property or the beneficiary. A Trustee in such a circumstance is not liable to pay interest, with the exception of the following circumstances- if the Trustee has themselves received interest; there is an unreasonable delay in paying trust-money to the beneficiary; if the Trustee has not received interest when they ought to have done so; if a trustee may be fairly presumed to have received interest; if the breach consists of failure to invest trust-money; if the breach results in the employment of the trust-property or its proceeds in trade or business.
  • Another one of the important duties & responsibilities of a Trustee is that a trustee is deemed liable for a loss from a breach of trust with respect to one portion of the trust-property cannot set-off again that has been accrued to another section of the trust-property, through another distinct breach of trust, against his liability.
  • On the occasion where a Trustee is succeeding another, they are not liable for the acts or defaults of their predecessor. 
  • In case of more than one Trustee entrusted with a trust property, one Trustee is not liable for a breach of trust by their co-Trustee. In a situation where co-trustees have jointly committed a breach of trust, or where one’s neglect enables the other’s breach of trust, each Trustee is liable for the whole loss sustained by the breach.
  • If a beneficiary’s interest has been passed onto another party and the Trustee, being unaware of the transfer, pays or delivers trust property to the previous beneficiary, the Trustee is not held liable for the property so paid/delivered.
  • If the beneficiary’s interest has been forfeited away or awarded to the Government by legal adjudication, the Trustee is then required to hold the property ofa Trust to the extent of such interest for the benefit of such individual in such way as the State Government may direct in this behalf.
  • Trustees shall only be chargeable for such moneys, funds, stocks and securities as they have actually received. 

Conclusion

In a Trust Registration, there are many duties & responsibilities of a Trustee that we discussed above, towards both the trust-property as well as the beneficiary or several beneficiaries listed in the contract. While no individual or organisation is legally bound to accept a Trust, upon acceptance, they are bound to fulfil the Trust’s purpose and are liable for any breach of trust they may commit with respect to any portions of the trust-property or towards one or more beneficiaries.

Read Our Article:Who is Settlor, Trustee, and Beneficiary?

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