Implied Trusts: Resulting trusts

Question 1

What happens in a resulting trust?

Answer 1

Property is held on trust for the person who transferred it/contributed to its acquisition; equitable interest ‘results’ back to the transferor/contributor

Question 2

In what 3 situations will resulting trusts conventionally arise? And will they be automatic or presumed?

Answer 2

1. Transfer on trust wholly/partially fails but property has been transferred to T (automatic)
2. Person gratuitously transfers property to another person (presumed) AKA gratuitous transfer resulting trusts
3. Person pays all/part of purchase price for an asset (presumed) purchase money resulting trusts

Question 3

When will an automatic resulting trust arise and what is their effect?

Answer 3

• Arises where there has been some sort of failure in creation of transfer/trust
• Effect is that they return the beneficial interest to S and give them SvV rights that they can collapse the trust and retain property or re-attempt intended express trust

E.g…
* A transfers to B intending B to hold on trust but fails to properly identify intended Bs = fails for uncertainty of objects = automatic resulting trust
* A transfers to B intending B to hold for non-charitable purpose trust which does not fall within recognised exemption to beneficiary principle = fails for non-compliance with beneficiary principle = automatic resulting trust

Question 4

Will all failed attempts to create an express trust produce a resulting trust?

Answer 4

No
* If trust fails due to lack of constitution, there is nothing to result back to S as they already have property
* Same with self-declaration where S remains full legal owner of property)

Question 5

In what 2 scenarios can a trust be validly created but fail subsequently?

Answer 5

• Runs full 125 year perpetuiry period and some trust property still not vested in B and no gift-over
• Purpose of non-charitable trust can no longer be carried out but there are funds remaining and no gift-over

Both cases - property held on RT for S’s estate

Question 6

What happens where a testamentary trust fails for uncertainty of objects or subject matter?

Answer 6

It will be treated as part of testator’s estate

Question 7

What happens if property is left to an individual by will and there is insufficient certainty re whether they are intended to be a T?

Answer 7

Will be a straightforward gift to that individual

Question 8

What happens if legal owner of property transfers it to a TP during lifetime but there is no intention to create an express trust?

Answer 8

• Evidence that transferor intended a gift = transfer is a gift
• No evidence that transferor intended gift = will be a presumed RT

Question 9

What are the two presumed resulting trusts?

Answer 9

1. Gratuitous transfer resulting trusts
2. Purchase money resulting trusts

Question 10

How will a gratuitous transfer resulting trust arise and what does it create?

Answer 10

• Arise where a transfer is gratuitous + there is no evidence that transferor intended recipient to receive property as a gift
• Creates a (rebuttable) presumption that transferor/contributor intended to create a trust

Gratuitous = done without good reason/free of charge

Question 11

How is the presumption in a gratuitous transfer resulting trust rebutted and what is the effect?

Answer 11

With evidence that transferor actual intention is inconsistent with the creation of a trust

e.g. A transfers legal title of an asset to B and…

• B provides consideration = sale and no presumption
• B does not provide consideration = presumption of RT but evidence that A intend to make a gift means presumption easily rebutted and B will become full legal owner of property
• B does not provide consideration and there is no evidence A intended to make a gift = resulting trust for A

Rebutted = no trust (as there is a presumption there is a trust)

Question 12

How will a purchase money resulting trust arise and what does the effect depend on?

Answer 12

• Arises where a person pays all/part of purchase price for an asset (rather than transferring asset to someone else)
• Effect depends on whether person pays the full purchase price or is only one person to provide it

Question 13

What is the effect re a purchase money resulting trust where a person pays the full purchase price?

Answer 13

Analysis similar to gratuitous transfer - if A purchases shares and registers them in B’s name = B will hold shares on RT for A unless it can be shown that this was not A’s intention because B provided consideration or A intended to make a gift

I.e. presumption can be rebutted the same

Question 14

What is the effect re a purchase money resulting trust where the purchase price for an asset is provided by more than one person?

Answer 14

In absence of evidence to contrary, a presumed RT will determine A and B’s respective equitable interests reflecting their contributions to the purchase price

(Does not apply to cohabitees; see next deck)

Question 15

What is the relevance of legal title re the purchasers’ equitable interests in the following situations:
1. A and B both contribute towards purchase price but B becomes sole legal owner
2. A and B both contribute towards purchase price of an asset but A contributes more than B and they both become joint legal owners of the asset

Answer 15

Legal title doesn’t matter; they will still both have equitable interests reflecting their respective contributions to purchase price

Question 16

How do purchased money resulting trusts tie in with joint ownership of land?

Recall: Legal title can only be held by a sole legal owner or up to four legal owners as joint tenants

Answer 16

Because legal ownership might not reflect intended beneficial ownership, joint legal owners often hold land on trust for themselves with their equitable interests reflecting the true beneficial ownership of the land, for example…

• A and B each contribute 1/2 of purchase price of land and B registered as sole owner, no express trust is declared = B holds land on trust for A and B as tenants in common in equal shares
• A contributes 70% and B 30% of purchase price and both registered as joint legal owners, they do not discuss how property should be shared and no express trust declared = A nd B hol land as joint tenants on trust for A and B as equitable tenants in common; A has 70% equitable share and B has 30% equitable share

Question 17

What should be done to make the beneficial entitlement clear?

Answer 17

Declare an express trust over the land which makes beneficial entitlement clear - in absence, implied trust may arise to determine equitable ownership of the land

NB implied trust not automatically there, is just a possibility

Question 18

What is the presumption of advancement and when does it occur?

Answer 18

A presumption that the transfer was intended as a gift due to the relationship between the transferor and transferee and therefore the presumption of resulting trust does not arise

NB this is outdated and provision was made for abolition in EA2010

Only including cos it’s in the workbook

Question 19

What relationships will give rise to presumption of advancement?

Answer 19

• Husband to wife (but not wife to husband nor fiance to fiance)
• From parent (unclear whether it can be mother) to (adult) child
• From person in ‘loco parentis’ to a minor child (where a person who has taken financial responsibility for a child)

NB OUTDATEDNES:///

Question 20

Is there a presumption of resulting trusts for voluntary transfers of personalty?

Remember personalty = any property besides land

Answer 20

Yes – but can be rebutted by:

1. Actual intention to show it was intended as a gift
2. Presumption of advancement (applies between family members)

Question 21

Does a presumption of resulting trusts arise if realty is transferred?

Answer 21

s.60(3) LPA: Resulting trust is not automatially implied for voluntary conveyances of land (because transferor does not expressly have to convey that it is for the use/benefit of receiver)

But CAN be rebutted – courts will need additional evidence to arrive at conclusion that it is intended as a resulting trust

CANNOT simply be presumed in the absence of evidence

Question 22

Can resulting trusts be presumed in purchase money cases?

Answer 22

Eg: X purchases property in the name of Y

If X contributes to whole / some of the price, a resulting trust is presumed and beneficial interest will be proportionate to the size of their respective contributions

Question 23

Does a presumption of resulting trust arise in favour of a contributor to purchase price of both personalty and realty?

Answer 23

Yes – but contribution must satisfy certain conditions

Question 24

What conditions must exist for a contribution to give rise to a presumption of resulting trusts?

Answer 24

1. Contemporaneous with the purchase (can’t make a contribution after the event)
2. Directed towards actual purchase price (can’t be towards lawyer’s fees)

Different rules apply to purchase of family homes

Question 25

What is the presumption of advancement and what is its effect?

Answer 25

Presumption of advancement: Applies to voluntary transfers and provision of money between family (losely) in VERY SPECIFIC SITUATIONS

Effect: No resulting trust presumed – transferor is presumed to gift property to transferee

Question 26

What situations give rise to the presumption of advancement?

Answer 26

1. Husband to wife
2. Male fiance to female fiance (as long as they subsequently formalise marriage)
3. Father (NOT mother) to child (minor or adult)
4. Person in loco parentis (guardian) to child –> generally ends when child turns 18

Question 27

Can the presumption of advancement be rebutted? What burden of proof is needed?

Answer 27

Yes – need to satisfy an evidential burden of proof to rebut before or at the time of the transfer

Any evidence after the transfer can only be used against the person and cannot be relied on

Eg: A purchase house for his daughter B. Wife recalls it was for his son-in-law, C, to repay purchase prise. Shortly before his death, A signed a document that gave house to his 3 children.

Initial presumption of advancement– but if you look at evidence (eg: that A retained title deeds) shows that presumption of advancement did not apply and A intended a resulting trust.

Question 28

Summary of presumption of advancement

Answer 28

Question 29

Summary of the above re automatic resulting trusts

Answer 29

Arises when express trust fails (due to 3 certainties / beneficiary principle / rule against perpetuities)

Question 30

When does an automatic resulting arise?

Answer 30

1. There is a** gap in the beneficial ownership** because there is no beneficiary who attains a vested interest

Eg: A creates a trust for B conditional on reaching 25 years, but B dies when she’s 21. Resulting trust for A arises.

2. The attempted trust lacks certainy of objects (eg: trusts for ‘my best friends)
3. The attempted trust does not define the beneficial interests with certainty (eg: a ‘decent amount’ to X)
4. The attempted trust offends the rules against perpetuity

Eg: Use income to maintain cricket grounds for benefit of employees. This fails charitable trust rule (as a personal nexus exists – rship between trustee + employees) and so trust is only valid if trustees spend capital in one go or limit duration to 21 years.

5. The attempted trust offends the beneficiary principle