RIGHTS AND LIABLITIES OF BENEFICIARIES UNDER TRUST

SWAMI VIVEKANAND SUBHARTI UNIVERSITY,

SUBJECT: Equity, Trust and Fiduciary Obligation

Project topic – Rights and Liabilities of Beneficiaries under Trust

SUBMITTED TO:

Assistant Professor: - Shalini Ma’am

SUBMITTED BY:

Parag Singh
SEMESTER
B.A. LL.B IXth

SARDAR PATEL SUBHARTI INSTITUTE OF LAW

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 RIGHTS AND LIABLITIES OF BENEFICIARIES UNDER TRUST

ACKNOWLEDGEMENT

I would like to give special thanks to my teacher Assistant Prof. Shalini Ma’am who
gave me the golden opportunity to do this project on the project topic of “Rights and
Liabilities of Beneficiaries under Trust” which helped me in doing a lot of research
and I came to know about so many new things I am really thankful to her. Secondly
I would like to thanks my parents and friend who helped me a lot in finalizing this
project within the limited time fit.

………………………

Parag Singh

B.A. LL.B.

IXth SEMESTER

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TABLE OF CONTENTS

1. ABSTRACT ……………………………………………………………………………4

2. INTRODUCTION ………………………….………………………………………….4

3. CLASSIFICATION OF RIGHTS AND LIABILTIES OF BENEFICIARIES ….5-13

RIGHTS OF BENEFICIARIES

LIABILTIES OF BENEFICIARIES

4. CONCLUSION………………………………………………………………………………….14
BIOGRAPHY

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 RIGHTS AND LIABLITIES OF BENEFICIARIES UNDER TRUST

RIGHTS AND LIABLITIES OF BENEFICIERIES UNDER TRUST

ABSTRACT

The abstract is designed to light upon the Rights and liabilities of beneficiaries under Indian Trust

Act 1882, The rights of Beneficiaries compel the trustee to act in the benefit thereof and to execute

the trust deed as per the will and intention of the author.

INTRODUCTION:

State law ultimately governs the rights that beneficiaries have to different trusts, but they typically

have a general power to monitor the trustee and trust activity. Trustees usually send out annual

trust reports to beneficiaries outlining the trust asset's gains, losses, and expenses such as

commission fees paid out. If a trustee fails to send at least one annual report, however, beneficiaries

can request an accounting of trust investments from the court.

If beneficiaries suspect that the trustee has breached his or her fiduciary duty to prudently manage

trust assets with due diligence, beneficiaries can take legal action to replace or sue the trustee.

These actions are generally handled by filing a petition with the local probate court. In some cases,

the trustee may be held liable for loss of trust principal and for income not realized due to

misconduct. Such violations can include bribery, extremely poor investment decisions and

profiting at the expense of the trust.

If all beneficiaries are "adults of sound mind" and agree to terminate a trust, they can take legal

action to do so. In most cases, the court would have to rule that the grantor's objectives for creating

the trust have been met or they can't reasonably be accomplished before the trust can be terminated.

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CLASSIFICATION OF RIGHTS AND LIABILITIES OF BENIFICIARIES

RIGHTS OF BENEFICIARIES

Section 55 Rights to rents and profits

Rights to rents and profits. -The beneficiary has, subject to the provisions of the instrument

of trust, a right to the rents and profits of the trust-property.

Section 56 Right to specific execution

Right to specific execution. -The beneficiary is entitled to have the intention of the author

of the trust specifically executed to the extent of the beneficiaries interest;

Right to transfer of possession

Right to transfer of possession.-and, where there is only one beneficiary and he is

competent to contract, or where there are several beneficiaries and they are competent to

contract and all of one mind, he or they may require the trustee to transfer the trust-

property to him or them, or to such person as he or they may direct.

When property has been transferred or bequeathed for the benefit of a married woman, so

that she shall not have power to deprive herself of her beneficial interest, nothing in the

second clause of this section applies to such property during her marriage.

Illustrations

(a) Certain Government securities are given to trustees upon trust to accumulate the interest until

A attains the age of 24, and then to transfer the gross amount to him. A on attaining majority may,

as the person exclusively interested in the trust-property, require the trustees to transfer it

immediately to him.

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(b) A bequeaths Rs. 10,000 to trustees upon trust to purchase an annuity for B, who has attained

his majority and is otherwise competent to contract. B may claim the Rs. 10,000.

(c) A transfers certain property to B and directs him to sell or invest it for the benefit of C, who is

competent to contract. C may elect to take the property in its original character.

Section 57 Right to inspect and take copies of instrument of trust, accounts, etc.

Right to inspect and take copies of instrument of trust, accounts, etc.-The beneficiary has

a right, as against the trustee and all persons claiming under him with notice of the trust,

to inspect and take copies of the instrument of trust, the documents of title relating solely

to the trust-property, the accounts of the trust-

property and the vouchers (if any) by which they are supported, and the cases submitted

and opinions taken by the trustee for his guidance in the discharge of his duty.

Section 58 Right to transfer beneficial interest

Right to transfer beneficial interest.-The beneficiary, if competent to contract, may

transfer his interest, but subject to the law for the time being in force as to the

circumstances and extent in and to which he may dispose of such interest.

Provided that when property is transferred or bequeathed for the benefit of a married

woman, so that she shall not have power to deprive herself of her beneficial interest,

nothing in this section shall authorize her to transfer such interest during her marriage.

Section 59 Right to sue for execution of trust

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Right to sue for execution of trust.-Where no trustees are appointed or all the trustees die,

disclaim, or are discharged, or where for any other reason the execution of a trust by the

trustee is or becomes impracticable, the beneficiary may institute a suit for the execution

of the trust, and the trust shall, so far as may be possible, be executed by the Court until

the appointment of a trustee or new trustee.

Section 60 Right to proper trustees

Right to proper trustees. -The beneficiary has a right

(subject to the provisions of the instrument of trust) that the trust-

property shall be properly protected and held and administered by proper persons and by

a proper number of such persons.

Explanation I.--The following are not proper persons within the meaning of this section:-

A person domiciled abroad: an alien enemy: a person having an interest inconsistent with

that of the beneficiary: a person in insolvent circumstances; and, unless the personal law

of the beneficiary allows otherwise, a married woman and a minor.

Explanation II.--When the administration of the trust involves the receipt and custody of

money, the number of trustees should be two at least.

Illustrations

(a) A, one of several beneficiaries, proves that B, the trustee, has improperly disposed of part of

the trust-property, or that the property is in danger from Bs being in insolvent circumstances, or

that he is incapacitated from acting as trustee. A may obtain a receiver of the trust-property.

(b) A bequeaths certain jewels to B in trust for C. B dies during

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As lifetime; then A dies. C is entitled to have the property conveyed to a trustee for him.

(c) A conveys certain property to four trustees in trust for B.

Three of the trustees die. B may institute a suit to have three new trustees appointed in the place

of the deceased trustee

(d) A conveys certain property to three trustees in trust for B.

All the trustees disclaim. B may institute a suit to have three trustees appointed in place of the

trustees.

(e) A, a trustee for B, refuses to act, or goes to reside permanently out of 1*[India] or is declared

an insolvent, or compounds with his creditors, or suffers

Section 61 Right to compel to any act of duty.

Right to compel to any act of duty.-The beneficiary has a right that his trustee shall be

compelled to perform any particular act of his duty as such, and restrained from

committing any contemplated or probable breach of trust.

Illustrations

(a) A contracts with B to pay him monthly Rs. 100 for the benefit of C. B writes and signs

a letter declaring that he will hold in trust for C the money so to be paid. A fails to pay the

money in accordance with his contract. C may compel B on a proper indemnity to allow C

to sue on the contract in Bs name.

b) A is trustee of certain land, with a power to sell the same and pay the proceeds to B and

C equally. A is about to make an improvident sale of the land. B may sue on behalf of

himself and C for an injunction to restrain A from making the sale.

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Section 62 Wrongful purchase by trustee.

Wrongful purchase by trustee.-Where a trustee has wrongfully bought trust-property, the

beneficiary has a right to have the property declared subject to the trust or retransferred

by the trustee, if it remains in his hands unsold, or, if it has been bought from him by any

person with notice of the trust, by such person. But in such case the beneficiary must repay

the purchase-money paid by the trustee, with interest, and such other expenses (if any) as

he has properly incurred in the preservation of the property; and the trustee or purchaser

must (a) account for the nett profits of the property, (b) be charged with an occupation-

rent, if he has been in actual possession of the property, and (c) allow the beneficiary to

deduct a proportionate part of the purchase-money if the property has been deteriorated

by the acts or omissions of the trustee or purchaser.

Nothing

(a) impairs the rights of lessees and others who, before the institution of a suit to have the

property declared subject to the trust or retransferred, have contracted in good faith with

the trustee or purchaser; or

(b) entitles the beneficiary to have the property declared subject to the trust or retransferred

where he, being competent to contract, has himself, without coercion or undue influence

having been brought to bear on him, ratified the sale to the trustee with full knowledge of

the facts of the case and of his rights as against the trustee.

Section 63 Following trust property--into the hands of third persons; into that into which it

has been converted.

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Following trust property--into the hands of third persons;

into that into which it has been converted.-Where trust-property comes into the hands of a

third person inconsistently with the trust, the beneficiary may require him to admit

formally, or may institute a suit for a declaration, that the property is comprised in the

trust.

Illustrations

(a) A, a trustee for B of Rs. 10,000, wrongfully invests the Rs.

10,000 in the purchase of certain land. B is entitled to the land.

(b) A, a trustee, wrongfully purchases land in his own name, partly with his own money,

partly with money subject to a trust for B.

B is entitled to a charge on the land for the amount of the trust-

money.

Section 64 Saving of rights of certain transferees.

Saving of rights of certain transferees.-Nothing in section

63 entitles the beneficiary to any right in respect of property in the hands of--

(a) a transferee in good faith for consideration without having notice of the trust, either

when the,

purchase- money was paid, or when the conveyance was executed, or (b) a transferee for

consideration from such a transferee.A judgement-creditor of the trustee attaching and

purchasing trust-property is not a transferee for consideration within the meaning of this

section.

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Nothing in section 63 applies to money, currency notes and negotiable instruments in the hands of

a bona fide holder to whom they have passed in circulation, or shall be deemed to affect the

IndianContract Act, 1872 (9 of 1872), section 108, or the liability of a person to whom a debt or

charge is transferred

Section 65 Acquisition by trustee of trust-property wrongfully converted

Acquisition by trustee of trust-property wrongfully converted.-Where a trustee wrongfully

sells or otherwise transfers trust-property and afterwards himself becomes the owner of

the property, the property again becomes subject to the trust, notwithstanding any want of

notice on the part of intervening transferees in good faith for consideration.

Section 66 Right in case of blended property

Right in case of blended property.- Where the trustee wrongfully mingles the trust-property

with his own, the beneficiary is entitled to a charge on the whole fund for the amount due

to him.

Section67 Wrongful employment by partner-trustee of trust-property for partnership

purposes.

Wrongful employment by partner-trustee of trust-property for partnership purposes.- If a

partner, being a trustee, wrongfully employs trust-property in the business or on the

account of the partnership, no other partner is liable therefor in his personal capacity to

the beneficiaries unless he had notice of the breach of trust.

The partners having such notice are jointly and severally liable for the breach of trust.

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Illustrations

(a) A and B are partners. A dies, having bequeathed all his property to B in trust for Z, and

appointed B his sole executor. B, instead of winding up the affairs of the partnership, retains

all the assets in the business. Z may compel him, as partner, to account for so much of the

profits as are derived from As share of the capital. B

is also answerable to Z for the improper employment of As assets.

LIABILITIES OF BENIFECIERIES

Section 68 Liability of beneficiary joining in breach of trust

Liability of beneficiary joining in breach of trust.- Where one of several beneficiaries--

(a) joins in committing breach of trust, or

(b) knowingly obtains any advantage therefrom, without the consent of the other

beneficiaries, or

(c) becomes aware of a breach of trust committed or intended to be committed, and either

actually conceals it, or does not within a reasonable time take proper steps to protect the

interests of the other beneficiaries, or

d) has deceived the trustee and thereby induced him to commit a breach of trust,

the other beneficiaries are entitled to have all his beneficial interest impounded as against

him and all who claim under him

(otherwise than as transferees for consideration without notice of the breach) until the loss

caused by the breach has been compensated.

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When property has been transferred or bequeathed for the benefit of a married woman, so

that she shall not have power to deprive herself of her beneficial interest, nothing in this

section applies to such property during her marriage.

Section 69 Rights and liabilities of beneficiaries’ transferee

Rights and liabilities of beneficiaries transferee.-Every person to whom a beneficiary

transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in

respect of such interest at the date of the transfer.

CONCLUSION

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In short, Beneficiaries are entrusted with certain rights and liabilities under Indian Trust Act

Generally, beneficiaries do not have any responsibilities (other than to declare any income received

from the trust in their tax return). However, each beneficiary in his or her own interest should

have an understanding of:

➢ The purpose of the trust

➢ The instructions to the trustee in the trust deed;

➢ Any limitations on the trustees powers;

➢ Rights under legislation and the trust deed;

➢ How trust assets are supposed to be managed;

➢ The basics of trust accounting;

➢ The overall principles of trustee administration.

A beneficiary of a discretionary trust cannot compel the trustee to give them any of the trust

property. However, beneficiaries have the right to:

➢ due administration of the trust;

➢ seek information relating to the management of the trust;

➢ request, but not require, the trustee ti exercise its discretion to make distributions to them;

➢ take the trustee to court if they deal with the property in a way which is not in accordance

with the terms of the relevant trust deed.

BIBLIOGRAPHY

BOOKS REFERRED:-

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• By G.P.Singh. Principles of Equity:. Central Law Publication.

• By: B.M.Gandhi Equity, Trust and Specific Relief, Sage Publication India

. STATUTE REFERRED

• Indian Trust Act, 1882

ARTICLES REFERRED:-

• Research Paper on Equity, Trust & Law , By Shreemanshu Kumar Dash Research Scholar,
Department of Law, Sambalpur University, Sambalpur, Odisha, INDIA

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