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What is a Resulting Trust?

Estate Planners | Monday, May 16th, 2011

An arrangement where one individual holds property or assets for the benefit of another individual and that is implied by the courts in particular cases where an individual transfers property to another, giving the person legal title to it without the intention of the person having beneficial or equitable interest in the property is said to be a resulting trust. Because the beneficial or equitable interest is not given to anyone else, the trust is said to “result” to the individual who transferred the property or assets. Thus, a resulting trust is not a trust in the traditional sense of the word.

When an express trust fails, it gives rise to the resulting trust. The grantor, which is the person who establishes a trust, transfers his assets and/or property to a trustee that has been appointed or required under the law, to execute and administer the trust, and to hold the trust for a beneficiary that profits from the actions of another. Should the beneficiary die without the grantor knowing of the death prior to the establishment of the trust, the express trust would be null and void, for the want of a beneficiary. The trustee would then hold the property in a resulting trust for the grantor or settler.

A resulting trust can also occur when an express trust does not exhaust or use up all trust property. For instance, if a grantor transfers $300,000 in trust that is to be used to pay the beneficiary during his or her lifetime in the sum of $3,000 a month from the principal of the trust as lieu of income generated by investments of trust property, assuming no other disposition has been specified. If the beneficiary dies after receiving just $30,000 (or some other amount) then the trustee would then hold the unused funds in the resulting trust for the grantor.

In a nutshell, the resulting trust arises by an action of law, due to circumstances in which the benefits within the trust must be given back to the grantor. Usually, the resulting trust will arise when an attempt to create an express trust falls through, and the trust then results or rebounds back to the grantor. Another example of a resulting trust if when the grantor of the trust fails to specify property in the trust appropriately, or the beneficiaries of the trust cannot be properly identified, or the trust instrument is written in a way that is unworkable. In this event, the trustee of the trust will hold title on the resulting trust for the grantor. There are also resulting trusts that can arise from the purchase of property, such as when one person gives another person money to buy property on their behalf.

There is no textbook definition of the term resulting trust; in fact, in most instances where the term has been applied, it has been on the basis of decided cases. In most instances where a resulting trust has been established, the trust arose when there was a failure in the original trust to distribute the assets and property or where informality was found legally. In these cases the courts basically assumed that the trust existed.

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