Trusts Arising as a Matter of Law

Question 1

In general, what trusts arise as a matter of law or by imposition of court?

Answer 1

1. resulting trust

2. constructive trust

Question 2

What is a resulting trust?

Answer 2

“resulting trusts” - involve reversionary interests, and are based on the presumed intent of settlor

Question 3

What is a constructive trust?

Answer 3

“constructive trusts” - are used to prevent “unjust enrichment”

Arise when –> there is no valid express declaration of trust; OR even, no trust at all

Question 4

What are the three types of “resulting trusts”?

Answer 4

1. purchase money resulting trust
2. resulting trust arising from failure of express trust
3. resulting trust from incomplete disposition of trust assets

Question 5

What is a “purchase money resulting trust”?

What rules apply?

What is the burden of proof?

Answer 5

“purchase money resulting trust” = presumed wnvr X furnishes consideration for acquisition of REAL or PERSONAL property, but, with C’s consent, title is taken in the name of Y (trustee)

RULES:

1. consideration must be for PURCHASE of property. improvements do not count.
2. consideration must be supplied AT OR BEFORE time Y takes title
3. if X supplies only part of the consideration, the resulting trust will only be for that amount

BURDEN OF PROOF –>

1. burden of proof is on person claiming to have supplied the consideration. Standard is CLEAR AND CONVINCING evidence.
2. Once X proves he provided consideration by CLEAR and CONVINCING evidence, a resulting trust is presumed. But Y can rebut this presumption

Question 6

What are the EXCEPTIONS when a purchase money resulting trust will not be found?

Answer 6

1. Close personal relationship between parties
   EFFECT –>
   (i). a gift is presumed, rather than a trust
   (ii). this presumption is rebuttable
2. If title is taken for an illegal purpose
3. No resulting trust if transferee obtained title wrongfully (ie..fraud). HOWEVER –> a constructive trust may still be imposed

Question 7

What circumstances will give rise to a “resulting trust on failure of express trust”?

What circumstances will not?

Answer 7

A resulting trust arises where SETTLOR has conveyed property to a trustee under an EXPRESS trust AND:

1. trust is void or unenforceable
2. beneficiary is dead or cannot be located
3. failure of charitable trust where cy presents is inapplicable

EFFECT –> Express trust terminates, and SETTLOR becomes beneficiary of RESULTING trust

RESULTING TRUST WILL NOT ARISE IF –>

1. trust instrument SPECIFICALLY or IMPLICITLY provides for disposition of trust property if trust fails or has been completed
2. Settlor was given consideration for his original transfer in trust
3. Settlor created the trust for an illegal purpose
4. CY PRES is applicable if charitable trust

Question 8

What is the rule w regards to resulting trust and excess corpus?

Answer 8

A resulting trust may arise when trust purpose is fully satisfied and some trust property remains