TRUST OF PROPERTY

Published By The Daily Star on February 13, 2010 (Link Above)

This week your advocate is Barrister Omar Khan Joy of the Supreme Court of Bangladesh and Head of ‘The Legal Counsel’. His professional interests include commercial law, corporate law, family law, land law, constitutional law, banking law, arbitration and intellectual property laws. Our civil and criminal law experts from reputed law chambers will provide the legal summary advice.

Reader’s query
My father wants to make a trust of a property. What is the procedure of making a trust in Bangladesh? Should my father require any permission? From where?
H. Hasan, Rajshahi

Response
Thanks for your query. I have understood that your father is willing to create a trust with regard to one of his properties. However, in your query you have neither specified the details and the nature of the property nor the purpose of creating the trust. The word ‘trust’ is very frequently used by many without the proper understanding of the exact implication of the same. Please bear in mind that the creation and the execution of trust may be very simple or may be very complex depending on the nature of the property and the purpose of the trust. The creation, discharge and all the related maters to a trust are governed by the Trusts Act-1882, which is one of the oldest Acts that we have inherited.

A ‘trust’ is an obligation imposed on one or more persons (trustees) with regard to the ‘trust property’ that has been transferred to the trustees by the creator of the trust. Your father will be known as the ‘creator’ or the ‘author’ of the trust. With a view to create a trust, as the author, he needs to specify the trust property and also needs to nominate a person or a group of persons to act as the trustees with regard to the trust. While selecting the trustees, it has to be kept in mind that only those who are capable of lawfully holding properties and competent to execute contracts can act as trustees. For example, a minor or an insane person cannot act as a trustee. Trustees have heavy, if not onerous, legal obligations that they have to strictly abide by. So, your father’s preferred trustees shall also be notified about their legal obligations. Such trustees are not entitled to receive any charge/remuneration for their services rendered to the trust, unless your father makes provisions for the same in the instrument creating the trust.

Furthermore, there must be a clear and certain ‘purpose’ or ‘purposes’ of creating the trust. It cannot be made for uncertain or undefined purpose(s). Above and beyond, it goes without saying that the purpose of the trust has to be a lawful one. As for illustration, a trust may be created for the education of poor children of an area; for certain medical purposes; charitable purposes; maintenance of someone; establishing a scholarship or a school or even for the benefit of a single person or a specified group of individuals. The person or group of persons, who will be benefited from the trust, will be legally known as the ‘beneficiaries’ of the trust. The beneficiary of your father’s trust may be even you and your family members or may be other people as exemplified above. Whoever the beneficiaries are, they need to be specified by your father in such a manner that the trustees can ascertain the beneficiaries with reasonable certainly. If the trust mentions such person(s) as beneficiaries, who cannot be ascertained, then the trust will fail for uncertainty. It is possible that your father creates a ‘fixed trust’ meaning that he makes the beneficiaries fixed or he may also create a ‘discretionary trust’ whereby allowing the trustees to use their discretions to select the beneficiaries from among a class of people.

In view of the above, your father is advised to draw up and execute a trust deed which must include, amongst others, specification of the trust property; particulars of the trustees and the beneficiaries. The trustees, however, have to give their consents to act as trustees. It is a common practice that they are made signatories to the trust instrument to reflect their consents to act as the trustees.

As per the provisions of the Registration Act, the trust deed has to be registered, if the trust property is an immovable one (e.g. land). If, one the other hand, the property in issue is not fixed but movable, like, money or otherwise, then there is no legal compulsion to register the trust instrument. Irrespective of the nature of the trust property, the property has to be transferred to the trustees by your father following the appropriate legal formalities annexed to the transfer of that type of property.

So far as the second part of your query is concerned, please note that there is no requirement to take any permission from any authority for creating a trust. Permission/registration is, however, needed for the creation of a Waqf. Waqf means the permanent dedication by a person professing Islam of any movable or immovable property for any purpose recognized by Muslim law as pious, religious or charitable purpose. Trust and Waqf are broadly similar concepts. Differences, however, exist in the purpose, administration and governing laws. I assume from your query that your father has decided for the creation of a trust and not a Waqf and consequently, I am not inclined to discuss further on Waqf.

You are strongly advised to consult an expert lawyer for drawing up the trust deed and also advised to counsel the trustees through the lawyers with regard to their obligations, rights and duties as trustees.

I hope that the above discussion will give you some understandings about the trust mechanism and will help to take the appropriate course of action.

For detailed query contact omar@legalcounselbd.com