THE CONCEPT OF LEGAL AND BENEFICIAL OWNERSHIP ON CONVENTIONAL TRUST (2)
Pillars of Islamic Trust
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
Muslim can apply trust under civil law, but must be shariah compliant
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