Resulting and Constructive Trusts

Question 1

Three Types of Resulting Trusts

Answer 1

(1) purchase money resulting trusts

(2) resulting trusts arising on failure of an express trust, and

(3) resulting trusts arising from an incomplete disposition of trust assets (that is, excess corpus).

Question 2

Beneficiaries of Resulting Trust

Answer 2

The settlor is the beneficiary of a resulting trust. If the settlor is deceased, the settlor’s successors in interest (heirs or beneficiaries under the settlor’s will) are the beneficiaries.

Question 3

Resulting Trust’s Purpose

Answer 3

The purpose of a resulting trust is to do what the settlor would have done had the settlor put their intent into words.

Question 4

Creation of a Resulting Trust: Express Trust Fails

Answer 4

A resulting trust arises where a settlor has conveyed property to a trustee under an express trust and (1) the trust is void or unenforceable, or (2) the beneficiary is dead or cannot be located.

A resulting trust will not be implied where: (1) the trust instrument specifically or implicitly provides for an alternative disposition, (2) the settlor was given consideration for their original transfer in trust, (3) the settlor created the trust for an illegal purpose, or (4) Cy Pres is applicable to a charitable trusts.

NOTE: A resulting trust may also apply on failure of a charitable trust where Cy Pres is inapplicable.

If express trust terminates, the settlor becomes the beneficiary of the resulting trust.

Question 5

Resulting Trust Implied from Excess Corpus

Answer 5

When the trust purpose is fully satisfied and some trust property remains.

There could be a resulting trust of part of the corpus even before the trust is terminated if it is clear that there is excess trust corpus.

Question 6

Purchase Money Resulting Trusts

Answer 6

Presumed whenever a beneficiary furnishes consideration for the acquisition of real or personal property but, with B’s consent, title is taken in the name of the trustee

Question 7

Constructive Trust

Answer 7

An equitable remedy to prevent unjust enrichment resulting from wrongful conduct (e.g., fraud, undue influence, or breach of a fiduciary duty.)

Equity turns the holder of legal title into a trustee when they may not in good conscience retain the beneficial interest in the property. The constructive trustee’s only duty is to convey the property to the person who would have owned it but for the wrongful conduct.

NOTE: A constructive trust must be requested as a remedy in a court action- it is not automatic

Question 8

If Y steals property from X, can we ask for a Constructive Trust remedy?

What if Y uses the stolen property to acquire other items?

Answer 8

1) No need to use a CT remedy (the title is still with X)

2) CT can be used for the other items acquired using the stolen property (Y takes title to the items and holds them in constructive trust for X)

Question 9

Constructive Trusts and BFPs

Answer 9

If property is conveyed to a third party who is not a BFP, the third party can be declared a constructive trustee. If Y takes property under a forged or fraudulent will, Y holds it in constructive trust for its rightful inheritor. This is true even if Y is innocent.