Introduction to Trusts

Question 1

What is a trust?

Answer 1

A trust is a fiduciary relationship in which a trustee holds legal title to specific property under a fiduciary duty to manage, invest, safeguard, and administer the trust assets and income for the benefit of designated beneficiaries, who hold equitable title.

Question 2

Explain legal title vs. equitable title?

Answer 2

Legal Interest — Trustee holds legal title and receives no benefit from the legal title.

Equitable or Beneficial Interest — Beneficiary holds equitable or beneficial interest and receives the benefits of ownership.

Question 3

What are the main types of Trusts?

Answer 3

Express Trusts — 2 kinds of express trusts distinguished primarily by the identity of their beneficiaries:

1. Private — Private beneficiaries (certain ascertainable persons)
2. Charitable — Charitable beneficiaries (indefinite class of persons or the public in general)

Trust Created by Operation of Law

1. Resulting Trusts: Resulting trusts arise from the presumed intention of the owner of the property.
2. Constructive Trusts: Constructive trusts are an equitable remedy used to prevent unjust enrichment.

Question 4

What is a Resulting Trust vs. a Constructive Trust?

Answer 4

Resulting Trusts: Resulting trusts arise by implication from the settlor’s conduct. Resulting trusts involve reversionary interests and are based on the presumed intent of the settlor.

Constructive Trusts: A constructive trust is 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.

Question 5

What are the main types of Resulting Trusts?

Answer 5

1. Purchase money resulting trusts
2. Resulting trusts arising on failure of an express trust
3. Resulting trusts arising from an incomplete disposition of trust assets (that is, excess corpus).

Question 6

What situations give rise to Constructive Trust?

Answer 6

1. Theft or Conversion
2. Fraud, Duress, etc.
3. Homicide meant to get property
4. Breach of Fiduciary Duties