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Resulting Trusts

Resulting Trusts

Trusts are sometimes classified by the intent, if any, of the settlor to create a trust. This article discusses the kind of trust for which the settlor’s intent is implied: the resulting trust.

Definition

If a trust is not created by a court as a remedy for injustice, a trust is created only according to the express or implied intent of the settlor. The general presumption is that a settlor wants a trustee to manage property for the benefit of a beneficiary.

A resulting trust is a trust created from the implied intent of the settlor. Where a settlor has transferred property but does not intend the transferee to have equitable title, and where the equitable title is not disposed of, the result in the law is that the property is returned to the settlor. There is another presumption. It is presumed that the settlor transferred property to the trust only for the purpose or purposes expressed in the trust, and that the purpose was not merely to leave the property with the beneficiary.

When the Result is a Resulting Trust

There are two circumstances is which a resulting trust usually occurs.

First, a resulting trust occurs when a private express trust or charitable trust fails, such as where the originally intended beneficiary dies or goes out of existence before the trust property is transferred to the trust.

Second, a resulting trust occurs when an express trust does not use or dispose of all trust property.

What Happens Under a Resulting Trust

What happens under a resulting trust is that the trustee simply holds the property for the benefit of the settlor until the legal title can be returned. If the settlor is deceased, the trustee holds the property for the benefit of the settlor’s heirs or residuary legatees until the legal title can be transferred to them. A resulting trust is a passive trust.

Purchase Money Resulting Trust

A resulting trust can occur when property is paid for by one person and legal title is taken by another. This is known as a purchase money resulting trust. Because a resulting trust is an implied trust, a purchase money resulting trust will not occur where the purchaser manifests a contrary intent. Moreover, some states do not permit purchase money resulting trusts.

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