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