Resulting/Implied trust Flashcards
What is a resulting trust?
A resulting trust is an equitable reversion that arises by operation of law whenever a person has created an express intentional trust, but the express trust fails or does not completely dispose of the trust property.
When do we have resulting trusts?
a) Automatic resulting trust:
Where a transfer on trust wholly or partially fails but the property has been transferred to the trustee.
b) Presumed resulting trust:
Where a person gratuitously transfers property to another person.
OR
Where a person pays all or part of the purchase price for an asset
What is an automatic resulting trust?
when failure arises in the creation of a trust, this is a default position which returns
the beneficial interest to the settlor, giving them Saunders v Vautier rights.
SO the ability to collapse the trust and either retain the property or re-attempt the
intended express trust.
Are all failed attempts to create an express trust produce a resulting trust?
no - specifically when..
- the trust fails due to lack of constitution.
- testamentary trust fails for uncertainty of objects (will just go to the residuary estate).
PS! Even if it was validly created, it may fail subsequently.
i.e a purpose of a non-charitable trust can no longer be carried out.
What is a presumed resulting trust?
Presumed resulting trusts arise where it is presumed that the transferor of property did not intend to dispose of his entire ownership interest in the property transferred.
Arises in different situations:
a) Gratuitous transfer resulting trusts
b) Purchase money resulting trusts
Presumed resulting trust in gratuitous transfer?
Presumed resulting trusts arise in situations where a transfer is gratuitous and there is no evidence that the transferor intended the recipient to receive the property as a gift.
They arise by way of a presumption that the transferor intended to create a trust.
Purchase money resulting trust?
Rather than transferring an asset to someone else, a person pays all or part of the purchase price for an asset.
When a person (A) pays the FULL purchase price and registers them to B’s name, the asset will be held on a resulting trust for A **unless it can be shown **that it was not A’s intention, because for example B provided consideration or A demonstrated the intention to make a gift.
What happens when there is more than one person provides for the purchase price of an asset?
A presumed resulting trust will determine A and B’s respective equitable interests.
Regardless of how legal title is held, A and B will be treated as having equitable interests which reflect their respective contributions to the purchase price.
What is the relation between purchase price in a presumed resulting trust and joint ownership of land?
Remember that legal title to land can only be held
(i) by a sole legal owner or
(ii) by up to four legal owners as joint tenants.
This means that the legal ownership of the land may not reflect the intended beneficial ownership.
Joint legal owners will therefore often hold the land on trust for themselves, with their equitable interests reflecting the true beneficial ownership of the land.
i.e A contributes 70% and B contributes 30% of the purchase price.
As joint legal owners, if they don’t declare an express trust..
- A and B hold the land as legal joint tenants on trust for A and B as equitable tenants in
common.
- A has a 70% equitable share and B has a 30% equitable share.
What is the presumption of advancement?
Situations in which the presumption of resulting trust does not arise because the relationship between the transferor and the transferee gives rise to the ‘presumption of advancement’ - transfer was intended as a gift.
a) From husband to wife
b) From parent to child (includes adult children)
c) From a person in ‘loco parentis’ to a minor child; person has taken on financial responsibility for a child (minor)
