Will Substitutes and Trusts Arising as a Matter of Law

Question 1

Durable power of attorney

Answer 1

Can apply to any interest in property owned by the principal.

It can be made to survive the disability or incapacity of the principal if the instrument so states.

Question 2

Agent

Answer 2

The agent (the person given the durable power) must be:

1. A natural person who is 18 years of age or older, or
2. A financial institution that has trust powers and that has a place of business in, and is authorized to conduct trust business in, Florida.

Question 3

Resulting trusts

Answer 3

involve reversionary interests and are based on the presumed intent of the settlor

Question 4

Constructive trusts

Answer 4

used to prevent unjust enrichment

Question 5

When do resulting and constructive trusts arise?

Answer 5

They are implied by law or imposed by courts

They arise either where there is no valid express declaration of trust or, frequently, when no trust was even intended.

The Statute of Frauds is inapplicable.

Question 6

When will resulting trusts be implied?

Answer 6

Resulting trusts are of 3 types:

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.

Question 7

Purchase money resulting trusts

Answer 7

A purchase money resulting trust is presumed whenever the bene furnishes the consideration (usually money, but any other valuable consideration suffices) for the acquisition of real or personal property but, with the bene’s consent, title is taken in the name of the trustee.

Question 8

PMR trusts - form of consideration immaterial

Answer 8

The consideration paid by the bene must be for purchase of the property. Sums paid by the bene to make improvements on the property or to pay taxes on it do not give rise to a trust.

Question 9

PMR trusts - Time when consideration furnished

Answer 9

The consideration (or obligation to pay) must be supplied at or before the time the trustee takes title.

Question 10

PMR trusts - Burden of proof on one claiming as bene

Answer 10

The burden is on the party claiming to be the bene of a resulting trust, to prove by clear and convincing evidence that he supplied the consideration.

Question 11

PMR trusts - rebuttable presumption of resulting trust

Answer 11

Once the bene proves the he supplied the consideration, a resulting trust is presumed; but the trustee can rebut by showing that no trust was intended (e.g. payment was a gift or loan to the trustee or satisfaction of a debt owing to the trustee).

Recitals as to who paid consideration are not conclusive.

Question 12

PMR trusts - not presumed when:

Answer 12

1. Parties are closely related
2. Unlawful purpose
3. Transferee obtained title wrongfully

Question 13

Circumstances giving rise to resulting trust

Answer 13

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 bene is dead or cannot be located.

A resulting trust may also apply on failure of a charitable trust where cy pres is inapplicable.

In such event, the express trust terminates and the settlor becomes the bene of the resulting trust.

Question 14

Circumstances where resulting trust not implied

Answer 14

1. The trust instrument specifically or implicitly provides for disposition of trust property when the trust has failed or been completed;
2. The settlor was given consideration for his original transfer in trust;
3. The settlor created the trust for an illegal purpose; or
4. Cy pres is applicable in cases of charitable trusts.

Question 15

Resulting trust from excess corpus

Answer 15

A resulting trust in favor of the settlor also arises 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 16

When will constructive trusts be implied?

Answer 16

Not really a trust but rather is a flexible equitable remedy to prevent unjust enrichment resulting from wrongful conduct, such as fraud, undue influence, or breach of a fiduciary duty.

The constructive trustee’s only duty is to convey the property to the person who would have owned it but for the wrongful conduct.

Proof = clear and convincing evidence.

Question 17

Constructive trust arising from theft or conversion

Answer 17

If the trustee steals property from the bene, title remains in the bene; there is no need to imply a trust. But if the trustee uses the property to acquire other items, he takes title to the items and holds them in constructive trust for the bene.

Question 18

Constructive trust arising from fraud, duress, etc

Answer 18

Where the trustee acquires property from the bene by fraud, duress, mistake of fact, or by breach of a fiduciary duty owed to the bene, the trustee holds the property in constructive trust for the bene’s benefit.

If property is conveyed to a 3rd party who is not a BFP, the 3rd party can be declared a constructive trustee. If the trustee takes property under a forged or fraudulent will, he holds it in constructive trust for its rightful inheritor. This is true even if the trustee is innocent.

Question 19

Constructive trust arising from breach of fiduciary duty

Answer 19

The fiduciary’s duty forbids him from taking title to property belonging to a bene and from seizing for himself an opportunity to acquire property that comes to him in his capacity as fiduciary.

If he violates this duty, courts may impose a constructive trust in favor of the person to whom he owes the duty.