by Trustees, in their role of managing and administering trust property, are subject to certain disabilities or restrictions aimed at preventing conflicts of interest and ensuring they act solely in the best interests of the beneficiaries. These disabilities ensure that trustees cannot take advantage of their position or the trust property for personal gain. The Indian Trusts Act, 1882, outlines several such disabilities, applicable to private trusts, and similar principles apply to trustees of public or charitable trusts.
Disabilities of Trustees:
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Purchase of Trust Property:
Trustees are generally prohibited from purchasing trust property either directly or indirectly. This rule prevents trustees from being both buyers and sellers, which could lead to a conflict of interest.
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Borrowing Trust Funds:
Trustees cannot borrow or lend trust funds to themselves. They must manage the trust’s assets prudently and for the benefit of the beneficiaries, not for their personal use.
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Profit from Trusteeship:
Trustees are not allowed to profit from their position beyond any remuneration explicitly provided for in the trust deed. This includes receiving commissions or making transactions that benefit them financially.
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Sale to Co-trustees:
A trustee cannot sell assets of the trust to their co-trustee unless such a transaction is explicitly permitted by the trust deed or approved by all beneficiaries.
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Renewal of Leases in Own Name:
Trustees cannot use their position to renew a lease of trust property in their own name or in a way that benefits them personally, ensuring they cannot exploit trust assets for their advantage.
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Use of Trust Property for Personal Benefit:
Trustees cannot use trust property for their personal benefit unless this use is explicitly allowed by the trust deed or all beneficiaries consent to it.
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Employment of Trust Funds in Own Business or Under Personal Security:
Trustees are prohibited from investing trust funds in their own business or securing a loan with trust assets for their personal benefit.
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Acquisition of Claims Against Trust Property:
Trustees should avoid acquiring interests or claims against the trust property that could lead to a conflict between their personal interests and their fiduciary duties.
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Delegate Authority Improperly:
Trustees cannot delegate their duties and responsibilities unless permitted by the trust deed, the law, or with the consent of all beneficiaries. This ensures that the trust is managed by those chosen by the settlor.
Rationale and Implications
Rationale behind these disabilities is to maintain the integrity of the trusteeship and ensure that trustees act solely in the interest of the beneficiaries, avoiding any actions that could harm the trust or benefit the trustee at the expense of the beneficiaries. Violations of these disabilities can lead to legal actions against trustees, including removal from their position, restitution, and other penalties.
