Resulting Trust

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Resulting Trust

An arrangement whereby one person holds property for the benefit of another, which is implied by a court in certain cases where a person transfers property to another and gives him or her legal title to it but does not intend him or her to have an equitable or beneficial interest in the property.

Since this beneficial interest is not given to anyone else, it is said to "result" to the person who transferred the property.

A resulting trust arises when an express trust fails. A settlor, one who creates a trust, transfers his property to a trustee, one appointed, or required by law, to execute a trust, to hold in trust for a beneficiary, one who profits from the act of another. If, without the settlor's knowledge, the beneficiary died before the trust was created, the express trust would fail for want of a beneficiary. The trustee holds the property in resulting trust for the settlor.

When an express trust does not use or exhaust all the trust property, a resulting trust arises. For example, the settlor transfers $200,000 in trust to pay the beneficiary during her lifetime $2,000 a month from principal, trust property, as opposed to income generated by investment of the principal. No other disposition is specified. The beneficiary dies after having received $20,000. The trustee holds the unexpended funds in a resulting trust for the settlor.

A purchase money resulting trust arises when one person purchases and pays for property and the name of another person is on the title. For example, a person purchases a farm for $100,000 and directs the seller to make the deed out to a third person. Nothing further appears concerning the purchaser's intention, and no relationship exists between the purchaser and the third person. In this situation, a resulting trust is created. The purchaser's intention is inferred from the absence of expressed intention that she intends the third person to have an interest in the farm. This occurs because a person usually does not intend to dispose of property without receiving something in return for it, unless she makes an express statement to the contrary, such as announcing an intention to make a gift or loan. If the purchaser is the spouse or parent of the third person, which is not the case here, it is presumed that a gift is intended. In this case, the third person holds a purchase money resulting trust for the purchaser.

A purchase money resulting trust does not arise, however, if the person who pays the purchase price manifests an intention that no resulting trust should arise. Purchase money resulting trusts have been abolished or restricted in a number of states.

The resulting trust attempts to dispose of the property in the manner the person who transferred it would have wanted if he had anticipated the situation. The court will order that the person with legal title to the trust property hold it in a resulting trust for the person who transferred it. When a charitable trust—a trust designed for the benefit of a class or the public generally—fails, a resulting trust will be invoked only if the doctrine of Cy Pres is deemed not to apply. This doctrine implements the intention of a person as nearly as possible when giving the intent literal effect would be illegal or impossible.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

resulting trust

n. a trust implied by law (as determined by a court) that a person who holds title or possession was intended by agreement (implied by the circumstances) with the intended owner to hold the property for the intended owner. Thus, the holder is considered a trustee of a resulting trust for the proper owner as beneficiary. Although a legal fiction, the resulting trust forces the holder to honor the intention and prevents unjust enrichment. Example: Mahalia leaves $100,000 with her friend, Albert, while she is on a trip to Europe, asking him "to buy the old Barsallo place if it comes on the market." Albert buys the property, but has title put in his own name, which the court will find is held in a resulting trust for Mahalia. A resulting trust differs from a "constructive trust" which comes about when someone comes into possession by accident, misunderstanding or dishonesty of property belonging to another. (See: trust, constructive trust)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
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