OF CERTAIN OBLIGATIONS IN THE NATURE OF TRUSTSCentral

Section 87 of The Indian Trust Act, 1882

Where a debtor becomes the executor or other legal representative of his creditor, he must hold the debt for the benefit of the persons interested therein.

Summary

Deals with situations where a debtor becomes the representative of their creditor.
If a person who owes money is appointed as the executor or legal representative of the person they owe money to, the debt is not wiped out.
The executor is the person named in a will to manage the deceased person's estate.
Instead of the debt disappearing, the debtor must hold the value of that debt for the benefit of everyone interested in the estate.
This includes heirs, creditors, or other beneficiaries named in the will.

Practical examples

1On January 1, 2024, Amit borrows Rs. 2 lakhs from his elderly friend, Suresh. In Suresh's will, Amit is named as the executor. Suresh passes away in November 2024. Amit cannot simply write off his own debt. He must hold that Rs. 2 lakhs for Suresh's daughter, who is the sole beneficiary of Suresh's estate.

2Vikram owes Rs. 50,000 to his business partner, Dev. When Dev dies without a will, Vikram is legally appointed as the administrator of Dev's estate. Vikram must hold the Rs. 50,000 debt for the benefit of Dev's surviving mother and sister, who are the interested parties in Dev's estate.

FAQ

1. Does a debt disappear if the debtor becomes the executor under Section 87 of the Indian Trusts Act, 1882?

No, under Section 87 of the Indian Trusts Act, 1882, the debt is not erased. The debtor who becomes the executor must hold the debt for the benefit of the persons interested in the creditor's estate.

2. Who benefits from the debt held by an executor-debtor under Section 87 of the Indian Trusts Act, 1882?

According to Section 87 of the Indian Trusts Act, 1882, the executor must hold the debt for the benefit of all persons interested in the deceased creditor's estate, which includes heirs, legatees, and other estate creditors.

3. What does "legal representative" mean in Section 87 of the Indian Trusts Act, 1882?

Under Section 87 of the Indian Trusts Act, 1882, a legal representative includes an executor or administrator who is legally authorized to manage and distribute the estate of a deceased person.

Test yourself

Q1.Under Section 87 of the Indian Trusts Act, 1882, what is the legal consequence when a debtor is appointed as the executor of their creditor's will?

Q2.Under Section 87 of the Indian Trusts Act, 1882, who are the "persons interested" for whose benefit the debtor-representative must hold the debt?

Q3.If David owes money to Clara, and upon Clara's death David becomes her legal representative, does the Indian Trusts Act, 1882 permit David to cancel the debt?

Q4.Under Section 87 of the Indian Trusts Act, 1882, what specific capacity must the debtor acquire to trigger this section?

86PreviousSection 86 Transfer pursuant to rescindable contract.88NextSection 88 Advantage gained by fiduciary.

←Section 86 Section 88→