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THE CONCEPT OF LEGAL AND BENEFICIAL OWNERSHIP ON CONVENTIONAL TRUST (2),…
THE CONCEPT OF LEGAL AND BENEFICIAL OWNERSHIP ON CONVENTIONAL TRUST
(2)
Pillars of Islamic Trus
t
Settlor
must have attain age of majority
not bankrupt, understand nature of txn
appoint SIRC as sole trustee, focus on benefit of public
Majlis to be sole trustee of Waqf, Nazr and trusts.
Trustee
attain age majority
not bankrupt , understand nature of txn
can be individual or legal entity
Beneficiaries
receive the benefit of trust / beneficial owner
can be individual or class of people
Sighah
offer and acceptance
trust assets transfer to trustee
Trust Deed
Subject matter
must be shariah compliant
doe snot contravene from maqasid shariah
Civil law and Islamic trust
Basis of operation
CL operates on Civil Law Principles, will be based on conventional system
Islamic trust based on Islamic Law Principles, must be shariah compliant
Jurisdiction
Both CL and Islamic trust falls under civil court
If Islamic trust matters under Waqf, Shariah court will hv the absolute discretion
Rules of perpetuity
CL cannot run against rules of perpetuity, trust ownership cover up to 21 yrs after person death
Islamic trust until the trust assets are exhausted
Condition of valid trust
Intention
Trust property
Beneficiary
Perpetuity
Public policy
Legal process of trust
1. Individual or corporate trustee
Individual trustee more vulnerable to death, bankruptcy and mismanagement
Corporate trustee chances of winding up, insolvency and mismanagement is lesser
2. Legal process to create trust
appoint trustee
prepare trust docs
ensure trustee fee reasonable
appoint protector to monitor
beneficiaries to have a copy f trust deed
3. Cost involve to create trust
no pf properties
frequency of distribution
amount of cash deposited
legal fees
job scope of trustee
duration of trust
4. Why need professional trustee
immediate cash payment to beneficiaries
no letters of administration / grant of probate
no listing of assets
no income tax clearance
no payment to creditors
5. Terms should include in Trust
appointment of trustee
list of beneficiaries
frequency of beneficiaries receive benefit
trust assets
trustee fee
indemnity of trustees
duration of trust
distribution of trust
applicable jurisdiction
Impact of FARAID
Trust shall not form part of faraid
reduce the value of estate as trust property excluded from estate
beneficiaries can be different from faraid
quantum of distributions also can be different
Muslim can apply trust under civil law, but must be shariah compliant