Private Trusts and Public Trusts

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A trust can be best described as a gift to either an individual or an institution for the benefit of a society or a private individual. The concept of trust is also termed as “Waqf” which is a concept that was introduced by Hazrat Ali (RA). At that time, the concept only dealt with agricultural land. Under the legal system of Pakistan, a trust is established only for a lawful purpose which can also be revoked. The Trust Act, 1882 provides legal coverage for the creation of public and private trusts. This legal coverage also allows the creators of trust incredible flexibility and protects the rights of the beneficiaries. 

 

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What law governs private trusts and public trusts in Pakistan?

Trusts Act, 1882 mainly deals with private trusts, as there are no specific laws for public trusts. However, this Act can still be applied in case of charitable trusts or public trusts.

 

 

What is the purpose of a trust?

The concept of trust protects the interests and rights of a person or persons who for any reason, cannot protect them by themselves. A capable person guards and deals with those rights and interests for the benefit of those who they actually belong.

 

 

Are the concepts of trust and will the same?

No, these concepts are completely different from one another.

 

 

What are the essential conditions of a trust?

For a trust to be established the following need to exist:

• Creator or author of the trust

• Trustee

• Beneficiary

 

 

Who can be the author or creator of the trust?

An author or creator of the trust can be any person who declares the trust.

 

 

Who is a trustee?

A trustee is any person who undertakes and accepts the declaration to provide benefit to the beneficiary. Moreover, he must have the legal capacity to hold a property.

 

 

Is the trustee bound to hold a trust?

​As required under the trust.

 

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Who can be a beneficiary?

A beneficiary is either an individual or an institution who is provided benefit from the trust and has the legal capacity of holding a property.

 

 

Is it necessary to get a trust registered?

No, it is optional because a trust is a pledge. However, the trust deed is registered by the concerned authority.

 

 

Why should I get a trust registered?

You should get a trust registered for reaping the following benefits:

• Control over the management and administration

• Blocking unwanted interference from the outside

• Becoming eligible for an income tax exemption

• Making the trust irrevocable

 

 

Can anyone be a member in a trust?

The concept of trust does not involve membership.

 

 

What can become a subject matter of a trust?

Any transferable property can become a subject matter of a trust.

 

 

What property can be subjected to a trust?

Any moveable or immoveable property of any values can be subjected to a trust.

 

 

How many trustees can be involved in a trust?

There is no legal limit on the number of trustees — the limit is included in the trust deed.

 

 

When is the trust of an unlawful purpose?

A trust is not of a lawful purpose when:

• it is based on fraud

• that purpose is forbidden under the law

• the nature is such that it would defeat the law if permitted

• it injures the person or property of another

• it contradicts public policy

• it has been declared as immoral by the court of law

 

 

What is a private trust?

A private trust is a trust that is created for benefitting a private individual.

 

 

What is a public trust?

A public trust is established for benefitting the society or a specific part of a society.

 

 

What role do ‘objectives’ play in private trusts and public trusts?

A private trust would fail due to uncertainty in the absence of clear and specific objectives. While on the other hand, a public trust sustains in the absence of clear and specific objectives as long as the intention to give charity is present.

 

 

What are the essential conditions of a public trust?

The following essential conditions need to be fulfilled to bring a public trust into existence:

• Existence of a trust property (either moveable or immoveable)

• Objectives must be for charity or for benefitting the society

 

 

How to create a public trust?

For the creation of a charitable and/ or public trust, a mere declaration is sufficient. This declaration can be made on a non-judicial stamp paper, the value of which will be mentioned in the Stamp Act according to the province.

 

 

What should an application for registering a public trust consist?

The application should contain the following:

• Details of documents upon which the trust is being created

• Details of the beneficiaries and the trustees

• Detail of the property

• Declaration of creating a trust via a trust deed

 

 

How is the trust of a moveable property validated?

Trust of a moveable property is validated when that property’s ownership is transferred to the trustee.

 

 

Where can a trust money be invested?

The trust money can be invested in the first mortgage of immovable property or in the government stocks. Moreover, it can also be invested in securities mentioned in the trust deed. These investments are a must.

 

 

When is a trustee’s office vacated?

A trustee's office is vacated either on the completion of his duties, appointment of a new trustee or at the trustee's death.

 

 

How is a new trustee appointed?

A new trustee is either appointed by the author of the trust or by a person nominated in the trust deed.

 

 

Under what conditions or circumstance is a trust dissolved?

A trust is dissolved on either of the following conditions or circumstances:

1. upon revocation of trust

2. it is now impossible to fulfil the purpose of a trust

3. the purpose of the trust has become unlawful

4. the purpose of the trust has been fulfilled

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Caution: 

Information contained in the above FAQs is for general understanding purposes only and may have altered or have become incorrect owing to variation in factual aspects and evolving laws, therefore, should not be treated as an alternate to professional legal advice.