Trusts - Resulting Trusts Flashcards
Resulting Trust
Resulting trust arises under circumstances by implication of law from the facts. No express words of settlor. Looking at conduct.
If we have a resulting trust, there aren’t beneficiaries like in a regular trust.
The only beneficiaries are the settlor (if still alive) or if settlor has died, the settlor’s successors in interest, the settlor’s heirs (if intestate), or the settlor’s will beneficiaries.
We’re carrying out a “presumed” intent.
The key is to recognize situations where a resulting trust is possible. This is always something you have to go to court to get.
2 Main Situations creating Resulting Trust
1) Failed Express Trust with implied reversionary interest:
-1> Ineffective Trust Creation: settlor tries to make express trust but it fails. Ex: Susan signs trust instrument indicating “her friends” as selected by trustee are beneficiaries. But when court looks at trust they say those are unascertainable beneficiaries. So assuming the instrument is silent, what happens? Trustee owns property of a resulting trust in favor of Susan. She gets the legal title back. So she has an implied reversionary interest. She would not become full owner of legal and equitable title to the property.
–» No Provision for Remainder: if the trust finishes its purpose and there is still money left but it doesn’t say what to do, that means there is no provision for the remainder. Like paying for a guy’s life until he dies. Court will find resulting trust in favor of settlor or his successor’s in interest and they’ll get legal and equitable title back.
-2> Purchase Money Resulting Trust. Here’s where you give money to seller but seller gives title to someone else. The legal relationship that arises when you do that could be 3 possible ramifications:
—»> It’s the purchase money resulting trust we’ll talk about here
—»> It could be a donee/donor situation where you gave the 3rd party a gift
—»> Debtor/creditor situation where you are lending to someone else by having the title to property go to someone else.
We have to sort through these 3: if there’s expectation to be repaid, then it’s a debt. If you intend to get the money back, that’s a simply debtor/creditor relationship. How to determine if it’s a gift or Purchase Money resulting trust? If the person paying the money is a spouse/parent/grandparent then the presumption is gift. Because that would make sense. If payor is not a close relative, then it’s considered a purchase money resulting trust because why would you pay to put title in someone else’s name if they’re not close enough to make it a gift or expect repayment.
