INTRODUCTION

According to underhill “ A trust is an equitable obligation binding a person called trustee to deal
with property over which he has control(called the trust property) for thr benefit of persons
(called beneficiaries) of whom he himself may be one and any of whom mwy enforce obligation
” thus the essential characteristics of a trust is thata person (the settlor) transfers the
property,or declares to another, or others(the trustees), property which he already holds , and
that property is to be managed and controlled for the benefit of someone else (the beneficiary).

ORIGIN OF TRUSTS

Trusts originates when assets are transferred to another person with instructions that the assets are
used to benefit a third party.

The question that arises is how can the use of the assets and the benefit of another be guaranteed?
Originally it couldnot. The transfer was the end of the matter and despite taken of that position. The
recipient had been endowed with the legal ownership of that property and those who anticipated
receiving the benefit from that property could be in difficulty.

How this was overcome marks the development of english law over all other systems.

A disappointed beneficiary could not hope to succeed by appealing to the law courts. He wouldnot get
very far. The legal ownership had been transferred and he had no legal title at all to the assets. Instead
he appealed to the lord chancellor. In the early days the lord chancelor was cleric and was known as
“keeper of king`s conscience” . the lord chancellor was a powerful person. He had jurisdiction over
spiritual matters and matters affecting people`s conscience. He could not deny the authority of the law
in the common law courts, and the rights that they conferred on others . in respect of the property
transfer . howeer by an indeginious step,although whilst not denying the legal ownership,the lord
chancellor could exercise his jurisdiction by saying to that person that if he did not honour his obligation
this would damage his conscience. The lord chancellor would therefore feel he should take action to
prevent this . he would enforce beneficiary rights of the person who the transfer was intended to
benefit.

These beneficial rights become part of the title to the property; english law , therefore adopted a split
concept of ownership. There was the legal ownership by the person holding the assets, who became
known as the trustee, and there was the equitable, or beneficial ownership held for the person , who
became known as the beneficiary.

This is a simple explanation of a complex historical process but, nevertheless,upon this distinction
between the legal and equitable ownership, the modern law of trusts has developed. This split in
ownership is unique to the english legal system and is unnown in civil law systems.

TYPES OF TRUSTS
Many kinds of trusts are available. Trusts may be classified by their purposes, by the ways in which they
are created, by the nature of the property they contain, and by their duration. One common way to
describe trusts is by their relationship to the trustor’s life.

In this regard, trusts are generally classified as either living trusts (“inter vivos” trusts), or

testamentary trusts. Living trusts are created during the lifetime of the trustor. Property held in a living
trust is not normally subject to probate (the court-supervised process to validate a will and transfer
property on the death of the trustor) Testamentary trusts are created as part of a will and must conform
to the statutory requirements that govern wills. This type of trust becomes effective upon the death of
the person making the will (the “decedent”) and is commonly used to conserve or transfer wealth. The
will provides that part or all of the decedent’s estate will go to a trustee who is charged with
administering the trust property and making distributions to designated beneficiaries according to the
provisions of the trust. Most trusts involve a number of technical legal concepts relating to ownership,
taxes and control. In creating a trust, one should consider several factors and obligations, including[6]:
Personal situation, including age, health and financial status;

Family relationships family’s financial circumstances;

Personal financial data: personal property, real estate holdings, securities, and other property — as well
as one’s tax situation and any debts or obligations;

The purpose of the trust: one’s goals, or what one hopes to accomplish by the arrangement;

The type of trust, and how versatile or flexible one’s plans are.

The amount and type of property it will contain;

The duration, or how long the trust will last;

The beneficiaries and their specific needs;

Any conditions that must be met by a beneficiary to receive benefits (such as attaining a certain age);

Alternatives for disposing of assets in case the trust conditions are not met or circumstances change;
and The trustee, and the conditions or guidelines under which he or she will function. This project
focuses on and performs a comprehensive study of the various legal issues and aspects involved in ‘The
Creation and Extinction of Trusts’. The law of trusts has proved to be versatile and adaptable and in
today’s world the law of trusts is only gaining in importance and stature. Trusts are making their
presence felt in almost every walk of life including international finance. Thus emphasis on the basics of
the law of trusts viz. ‘Creation and Extinction of Trusts’ assumes an even greater importance as it will
enable a fuller and more comprehensive understanding of the legal niceties involved in trust law and will
equip one to face the challenges posed by the ever developing law of trusts in today’s dynamic world.

AIMS AND OBJECTIVES

The aim of this project is to perform a comprehensive study and analysis of the law relating to ‘Creation
and Extinction of Trusts’. The project aims at analysing the various statutory provisions relating to
creation and extinction of trusts in the light of case law. Another objective of this project is to study
ancillary issues and questions which are inextricably related to the creation and extinction of trusts such
as revocation of trusts, essentials of a valid trust, reasons for creating trusts and persons competent to
create and extinguish trusts. The project also throws light on the definition of trusts, origin of trusts and
modern day developments in trust law

Nature of Project
The project is analytical as well as descriptive in nature. However majority of the project is analytical in
nature.

Sources of Data
The sources of data used are primary as well as secondary in nature. A host of leading textbooks
relating to the law of trusts have been referred to. Legal encyclopaedias have also been referred to.
Case reporters like All England Reports and All India Reporter have also been used. Electronic
information sources like Westlaw and Manupatra have been accessed. Information has also been
accessed from the information superhighway
Scope and Limitation

The scope of this project is limited to performing a comprehensive study and analysis of the Indian law
relating to creation and extinction of trusts. Relevant English case law and principles have been
incorporated and analysed but American law relating to the creation and extinction of trusts has been
ignored. Moreover with respect to religious trusts only Hindu religious trusts have been dealt with.
Trusts relating to other religions and wakfs have not been dealt with.

Research Questions
The research questions are:

*What is a trust?

* What is the origin of the law of trusts?

*What are the different kinds of trusts?

* What are the various factors and obligations that must be kept in mind while creating a trust?

*Why are trusts created and extinguished?

*Which are the relevant statutory provisions in India which deal with creation and extinction of trusts?

* Who are competent to create trusts?

*What are the essential requirements for a valid trust?

*How can a trust be extinguished?

* Why are trusts estinguished?

*Which are the relevant statutory provisions in India which deal with creation and extinction of trusts?

* Who are competent to create trusts?

*are the essential requirements for a valid trust?

* How can a trust be extinguished?

*Why are trusts extinguished?

* How can a trust be revoked?

*How do the provisions relating to creation and extinction of trusts apply to religious and charitable
trusts?

* How is the law of trusts developing today?