Usually a trust is created by a settlor, who writes and signs documents which give authority to a trustee who will manage their funds and accounts. The trustee will be in charge of distributing the assets listed to beneficiaries who will receive the property items.
In contrast, a “resulting trust” is created by a judge in circumstances where the property was transferred to a trustee, but the intended beneficiaries are no longer available. In such instances, a resulting trust is created in order to return the property from the trustee back to the settlor. Thus, the property is said to “result back” or return to the possession of the settlor.
A resulting trust is used by a judge as an equitable remedy in order to prevent unjust enrichment. They are useful in preventing unwanted distributions of property and to prevent abuses of powers by trustees.
Under what circumstances are Resulting Trusts created?
Resulting trusts may be enforced by a judge in the following situations:
Failure of an express trust: A resulting trust may arise if a previously valid trust has failed because the beneficiaries are missing or deceased, the trust purpose is void or unenforceable, or if other remedies are unavailable. The settlor becomes the beneficiary and the assets will be returned to them
Semi-Secret Trusts: A “semi-secret trust” is one where a trust has been created but the beneficiaries have not been named in the document. In this case the court will prescribe a resulting trust, which will distribute the assets either to the settlor or to the settlor’s heirs
Purchase Money Resulting Trust: this arises when the beneficiary provides monetary consideration for purchase of the trust property, but the settlor takes the title in their name. The settlor will be the legal owner of the property
If the settlor has already become deceased, the court will typically issue a resulting trust in favor of making distributions to the settlor’s estate or heirs. In other words, the trust property becomes part of the deceased settlor’s estate, and the resulting trust operates much like a will.
Are there any Defenses available if a judge has ordered a Resulting Trust?
Resulting trusts are equitable remedies which are designed to prevent trustees or beneficiaries from illegally holding property for the settlor. However, in some cases, the settlor may be requesting for the property to be returned, but the trustee or beneficiary is entitled to continue holding the property. In such cases a defense may be available for the trustee and the resulting trust will not be issued.
Some equitable defenses to a resulting trust order include:
Laches: The settlor is not entitled to a resulting trust because they have unnecessarily delayed in brining the lawsuit
Unclean Hands: The settlor is not entitled to a resulting trust because they have performed a similar wrongdoing as the defendant
A settlor can also implicitly waive their right to a resulting trust in some situations. For example, if the settlor has transferred property for an unlawful purpose and gained a benefit from the transaction, the court will likely deny a request for a resulting trust. Due to their illegal intentions, the settlor is deemed to have waived their right to a resulting trust, and the settlor will not be allowed to retrieve their property.
Do I need a Lawyer for a Resulting Trust dispute?
Resulting trusts are powerful remedies which are enforceable according to the trust laws of your state. It would be to your benefit to contact a lawyer for advice if you are involved in a dispute over a resulting trust. Whether you are the party requesting for a resulting trust, or if a resulting trust has been issued against you, the services of an attorney are indispensable. Laws governing trusts vary by state, and a seasoned trusts lawyer can direct your course of action according to state laws.