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Home >Money >Personal Finance >A public charitable trust may be terminated when its purpose is completely fulfilled

My great grandfather, who has passed away, formed a Trust, naming family members as trustees for doing various charities from the income derived from the properties. It was created through a registered Will. It was mentioned in the Will that after the demise of any trustee, his eldest male heir will become the trustee.

My first question is, whether the Trust can be made to end or we can put an end to the Trust by an agreement between the trustees? If yes, then if one of the trustees is absent or not traceable, then how should we proceed? In case there are no male heirs for a particular trustee, then who will become the trustee after his demise?

The second question is, whether the properties belonging to the Trust can be sold by the trustees or trustee based on an internal arrangement (executed by way of an agreement). If so, what are the precautions to be taken?

—Name withheld on request

We understand that the Trust created by your grandfather under his Will is not a private family Trust but is a public charitable Trust. If that is the case, then a public charitable Trust cannot be dealt in the manner for the purposes of determination or putting an end to such a charitable Trust.

On your first query, as regards the public charitable trust coming to an end, note that a Trust may be extinguished or terminated only if its purpose is completely fulfilled or its purpose has become unlawful or when the fulfilment of its purpose becomes impossible by destruction of the Trust property or otherwise or when the Trust, being revocable, is expressly revoked. However, the assets and liabilities of the Trust may be transferred to another charitable Trust having similar objects and the former Trust can be dissolved, provided that the same is done after seeking permission from a competent authority such as the office of the charity commissioner (of a particular state) where the Trust is registered.

As regards the query that if one of the trustees is absent or not traceable or if there are no male heirs for a particular trustee, who would become the trustee after his demise would depend on the provisions of the Will or the trust deed, which will govern the mechanism for appointment or disqualification of trustees. However, in the absence of any such mechanism, the current trustees will have the power to modify by co-option of new trustees, after passing necessary resolutions.

On your second query, the property of a public Trust is not the private property of the trustees and cannot be dealt with or disposed of as a private property. Therefore, appropriate sanction may be required in respect of the state laws and if the public charitable Trust is drawing any privileges or exemptions or getting any benefits under the Income-tax Act, then permission may be required to be obtained from the income tax authority, in addition to sanction by the appropriate competent authority or charity commissioner, where you will have to demonstrate why such sale of the property is required by you.

Aradhana Bhansali is partner, Rajani Associates. Queries and views at mintmoney@livemint.com

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