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Nature and Creation of a Trust under the Indian Trusts Act

Updated 11 October 2026 · Fact-checked

A trust is an obligation attached to ownership of property. The author of the trust confides it to a trustee, who holds it for a beneficiary. Under Section 6 a trust arises when intention, purpose, beneficiary and trust-property are certain and the property is transferred. Section 5 adds formalities for immoveable and moveable property.

Understand Nature and Creation of a Trust

A trust is a relationship built around property. One person (the author or settlor) hands over property, or declares that he holds it, for the benefit of someone else. The person who holds it is the trustee. The person who benefits is the beneficiary. Under the Act, the trust is the obligation that binds the trustee to deal with the property for the beneficiary's benefit or for a stated purpose.

The three parties have separate roles. The author creates the trust and sets its purpose. The trustee holds the legal title and must manage the property as the trust requires. The beneficiary has the benefit but not the control. One person can play more than one role. The author can be the trustee. A trustee can also be a beneficiary, subject to the rules on conflict of interest studied under trustees' duties.

The Act says how a trust is created. Section 6 sets the core test. The author must indicate, with reasonable certainty, by words or acts: (a) an intention to create a trust, (b) the purpose, (c) the beneficiary and (d) the trust-property. Unless the trust is declared by will, or the author is himself to be the trustee, he must also transfer the trust-property to the trustee. This is the three certainties idea, with the property made a fourth item here. Vague wishes such as 'hoping he will continue it in the family' fail because the beneficiary is uncertain.

Section 5 then adds formalities. A trust of immoveable property is valid only if declared by a non-testamentary instrument in writing, signed by the author or the trustee, and registered. The other route is a will. A trust of moveable property is valid if declared in that same manner, or if ownership of the property is transferred to the trustee. These rules do not apply where they would operate to effectuate a fraud.

Other points complete the picture. Section 7 says a trust may be created by every person competent to contract, and, with the permission of a principal Civil Court of original jurisdiction, by or on behalf of a minor. Section 10 says a trustee must be capable of holding property, no one is bound to accept a trust, and acceptance or disclaimer is by words or acts. Section 1 excludes waqf, public or private religious or charitable endowments and some other cases from the Act.

Key rules to remember

Section 6: essentials of a trust: Trust = intention + purpose + beneficiary + trust-property (each with reasonable certainty) + transfer to trustee; Transfer is not needed if the trust is declared by will or the author is himself the trustee. All of this is subject to Section 5.
Section 5: immoveable property: Valid only if: written non-testamentary instrument + signed by author or trustee + registered; OR by will; Oral declaration of a trust of immoveable property is not valid. A will needs no registration under this section.
Section 5: moveable property: Valid if: declared as for immoveable property, OR ownership transferred to the trustee; Moveable property can therefore be held on trust by delivery or transfer, without writing.
Section 5: fraud exception: Formality rules do not apply where they would effectuate a fraud; Use it only when facts show fraud.
Section 7: who may create a trust: Any person competent to contract; or a minor, by or on his behalf, with permission of a principal Civil Court of original jurisdiction; Competence follows Section 11 of the Indian Contract Act, 1872.
Section 10: who may be trustee: Any person capable of holding property; if discretion is involved, must be competent to contract; No one is bound to accept a trust. A disclaimer must be within a reasonable period.

How to solve Nature and Creation of a Trust questions

Use this method for any question asking whether a trust is validly created or asking you to explain the nature of a trust.

1Identify the parties: author, trustee and beneficiary. Note if one person plays two roles.
2Classify the property as moveable or immoveable. This decides which Section 5 rule applies.
3Test Section 6: is there reasonable certainty of intention, purpose, beneficiary and trust-property?
4Check the mode: for immoveable property look for a signed, registered written instrument or a will. For moveable property look for a valid declaration or transfer of ownership to the trustee.
5Check capacity: the author under Section 7 and the trustee under Section 10, including acceptance or disclaimer.
6Look for special facts: a will, an author who is also trustee, fraud, or a religious or charitable endowment excluded by Section 1.
7Write the conclusion in plain words: the trust is valid, invalid or only a moral obligation, with the reason.

Quickest way: Property type first, certainty second

When to use it: Use this for short validity questions when time is limited.

Write 'Moveable or immoveable?' and decide.
If immoveable, look for a registered signed writing or a will. If neither exists, the trust fails under Section 5.
If moveable, look for writing or a transfer of ownership to the trustee.
Run the four Section 6 items in your head. If one is vague, say the trust fails for uncertainty.
Finish with one line: 'Hence the trust is valid/invalid.'

Common mistakes in Nature and Creation of a Trust

Saying any written trust of land is valid.
Students remember 'writing' but forget registration.
Fix: For immoveable property a non-testamentary instrument must be in writing, signed by the author or trustee, and registered. A will is the alternative.
Requiring registration for a trust made by will.
Students merge the rule for instruments with the rule for wills.
Fix: Section 5 allows a trust of immoveable property by the will of the author or the trustee. Registration applies to the non-testamentary instrument.
Missing the fourth Section 6 item, trust-property.
Students learn only intention, purpose and beneficiary.
Fix: Always test all four. A direction to divide 'the bulk' of property is too uncertain, as the Section 6 illustration shows.
Treating hope or request as a trust.
Students read moral wishes as legal obligations.
Fix: Look for words showing intention to bind. 'Hoping he will continue it in the family' does not create a trust because the beneficiary is not certain.
Saying the author cannot be the trustee.
Students assume trust always means two persons.
Fix: Section 6 expressly covers an author who is himself the trustee. Then no transfer of property is needed.
Forgetting that no one is bound to accept a trust.
Students focus on the author's side only.
Fix: Under Section 10 the intended trustee may accept by words or acts, or disclaim within a reasonable period. A disclaimer stops the property vesting in him.

Worked examples

Example 1

Ramesh orally tells his friend Suresh in Pune, 'I hold my flat in Pune in trust for my daughter Meera.' No document is signed or registered. Ramesh dies without a will on the point. Is a trust created?

Show the solution

Provision: Section 5 of the Indian Trusts Act, 1882 says no trust in relation to immoveable property is valid unless declared by a non-testamentary instrument in writing, signed by the author or the trustee and registered, or by will.
Facts: The flat is immoveable property. The declaration was only oral. There is no signed or registered instrument and no will.
Analysis: Even if intention, purpose, beneficiary and property are clear under Section 6, Section 5 makes the formalities a condition of validity. Nothing suggests fraud to bring in the exception.
Conclusion: No valid trust of the flat was created.

Answer: No valid trust was created. A trust of immoveable property needs a signed, registered written instrument or a will under Section 5.

Example 2

Anita hands over ₹5,00,000 in cash to Bhaskar and says, 'Keep this and use it for the education of my nephew Chetan.' Bhaskar accepts. Is a valid trust created?

Show the solution

Provision: Section 6 requires reasonable certainty of intention, purpose, beneficiary and trust-property, and transfer to the trustee unless the trust is by will or the author is trustee.
Facts: Intention to confide the money is shown by words and acts. The purpose is Chetan's education. The beneficiary is Chetan. The property is ₹5,00,000. Anita has transferred it to Bhaskar.
Section 5: Cash is moveable property. A moveable-property trust is valid if ownership is transferred to the trustee, even without writing.
Section 10: Bhaskar can hold property and has accepted by words or acts. Section 7: Anita is assumed to be competent to contract.
Conclusion: All requirements are met.

Answer: Yes. A valid trust of moveable property is created. Ownership of the money was transferred to Bhaskar, and the four Section 6 items are certain.

Exam tips

Begin every validity answer with the property type. Section 5 turns on it.
Quote the key words of Section 5 and Section 6 and apply them to the facts. Do not only recite.
Use the Section 6 illustrations as models. 'Hoping' and 'bulk' are classic failure facts.
Mention Section 1 savings, such as waqf and religious or charitable endowments, when facts hint at them.
Write a one-line conclusion. ICSI answers follow provision, analysis, conclusion.

Practice questions from Non-Corporate Entities

Nature and Creation of a Trust in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Nature and Creation of a Trust: frequently asked questions

What are the essentials of a valid trust under the Indian Trusts Act, 1882?

Section 6 requires reasonable certainty of intention, purpose, beneficiary and trust-property. The property must also be transferred to the trustee, unless the trust is by will or the author is himself the trustee. All of this is subject to Section 5.

Is registration compulsory for a trust of immoveable property?

Yes, if it is created by a non-testamentary instrument. Section 5 requires it to be in writing, signed by the author or trustee, and registered. A trust by will is the alternative route.

Can a trust of moveable property be created without writing?

Yes. Under Section 5, a trust of moveable property is valid if ownership is transferred to the trustee. Otherwise it must be declared in the written, signed and registered manner.

Can the author of a trust also be its trustee?

Yes. Section 6 recognises a trust where the author is himself to be the trustee. In that case there is no separate transfer of property to a trustee.

Can a person refuse to be a trustee?

Yes. Section 10 says no one is bound to accept a trust. The intended trustee may disclaim within a reasonable period, and the disclaimer prevents the property from vesting in him.