Cecily Zamora
Implied trusts are created by operation of law, not by the express intention of the settlor. They arise when there is no valid express trust to regulate the relationship between the settlor, trustee, and beneficiary. Implied trusts are gap-fillers that reflect presumed intentions or prevent unfairness. They are not required to be evidenced in writing and do not require the signature of the settlor. The two main types of implied trusts are resulting trusts and constructive trusts. Resulting trusts occur when a trust fails, and the property returns to the settlor or provider of funds. Constructive trusts, on the other hand, are imposed by law to prevent unconscionable conduct, regardless of the parties' intentions.
| Characteristics | Values |
|---|---|
| Nature | Implied trusts are gap-fillers that arise when there is no valid express trust to regulate the relationship between the settlor, trustee, and beneficiary. |
| Creation | Implied trusts are created by operation of law, not by the express intention of the settlor. |
| Types | Resulting trusts and constructive trusts are two types of implied trusts. |
| Resulting trusts | Arise when property returns to the settlor or provider of funds, either because an express trust fails or because of presumed intention. |
| Constructive trusts | Imposed by law to prevent unconscionable conduct, regardless of the parties' intentions. |
| Requirements | Unlike express trusts, implied trusts are not required to be evidenced in writing and do not require the signature of the settlor. |
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What You'll Learn
Implied trusts are gap-fillers
Implied trusts are created where some of the legal requirements for an express trust are not met, but an intention on behalf of the parties to create a trust can be presumed to exist. They arise when there is no valid express trust to regulate the relationship between the settlor, trustee, and beneficiary. Implied trusts can be created quite informally and flexibly, and they do not require the signature of the settlor.
There are two main types of implied trusts: resulting trusts and constructive trusts. A resulting trust arises when property returns to the settlor or provider of funds, either because an express trust fails or because of presumed intention. For example, if Party A gives money to Party B for the purchase of property which has never been returned to Party A, the law of equity will imply that Party B is not an absolute owner of the property and is holding the property in trust for Party A. A resulting trust may also arise where a trust instrument is not properly drafted, and a portion of the equitable title has not been provided for. In such a case, the law may raise a resulting trust for the benefit of the grantor (the creator of the trust). The name 'resulting' is derived from the Latin word 'resalire', which means 'to jump back'.
A constructive trust, on the other hand, is imposed by law to prevent unconscionable conduct, regardless of the parties' intentions. Constructive trusts are considered an "equitable remedy" imposed by law.
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Resulting trusts
Implied trusts are gap-fillers that arise when there is no valid express trust to regulate the relationship between the settlor, trustee, and beneficiary. They arise by operation of law, through equity deciding that a trust should apply to a particular situation.
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Constructive trusts
Implied trusts are gap-fillers that arise when there is no valid express trust to regulate the relationship between the settlor, trustee, and beneficiary. They are created by operation of law, through equity deciding that a trust should apply to a particular situation.
For example, in the Australian case of Muschinski v Dodds, a de facto couple lived in a house owned by the man. They agreed to build a pottery shed for the woman to do arts and crafts in, and she paid for part of it. When they broke up, the High Court held that the man held the property on a constructive trust for both himself and the woman, in the proportions that they had contributed to the improvements to the land.
Another example is the case of Attorney General for Hong Kong v Reid, in which a senior prosecutor took bribes not to prosecute certain offenders. With the bribe money, he purchased property in New Zealand. His employer, the Attorney General, sought a declaration that the property was held on a constructive trust for them, on the basis of breach of fiduciary duty. The Privy Council awarded a constructive trust.
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Presumed intention
Implied trusts are created by operation of law and not by the express intention of the settlor. They are imposed to reflect "presumed intentions" or to prevent unfairness.
A resulting trust, a type of implied trust, arises from the presumed intention of the settlor. This is distinct from an express trust, which is created with the deliberate intention of the settlor. In the case of resulting trusts, the law of equity will imply that the trustee is not the absolute owner of the property and is holding the property in trust for the settlor. This occurs when a person transfers property to another for no consideration or contributes to the purchase price of property held in another's name.
For example, if Party A gives money to Party B for the purchase of property, which has never been returned to Party A, Party B becomes the resulting trustee of Party A's payment. The law of equity will imply that Party B is not the absolute owner of the property and is holding the property in trust for Party A.
The doctrine of resulting trusts cannot apply merely because the current owner of the legal estate transfers that estate voluntarily to another party. This presumption of resulting trusts can be displaced by another contrary presumption, such as the 'presumption of advancement', where there is an inference of intent to donate money towards the purchase of a legal estate. This presumption tends to operate in the family context, where there may be altruistic motives on the part of the donor towards the donee.
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Preventing unfairness
Implied trusts are created by operation of law to prevent unfairness and reflect presumed intentions. They are not created by the express intention of the settlor but arise automatically by law.
Implied trusts are gap-fillers that arise when there is no valid express trust to regulate the relationship between the settlor, trustee, and beneficiary. They are created to prevent unfairness and ensure that the intentions of the testator are not used as an instrument for committing or abetting fraud.
For example, a resulting trust, a type of implied trust, arises when property returns to the settlor or provider of funds, either because an express trust fails or because of presumed intention. This type of trust can be used to prevent unfairness by ensuring that the property is held in trust for the rightful owner, even if there is no written evidence of the trust.
Another example is a constructive trust, which is imposed by law to prevent unconscionable conduct, regardless of the parties' intentions. This type of trust can be used to prevent unfairness by imposing a remedy when there is a defect in the transfer of property.
Overall, implied trusts are an important tool to ensure fairness and protect the interests of all parties involved in a trust relationship. They fill the gaps left by express trusts and prevent fraud and abuse.
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Frequently asked questions
An implied trust is a legal arrangement where a trust is created by operation of law, not by the express intention of the settlor.
Implied trusts are created by operation of law to reflect the presumed intentions of the parties involved or to prevent unfairness.
There are two main types of implied trusts: resulting trusts and constructive trusts.
Resulting trusts arise when property returns to the settlor or provider of funds, either due to a failed express trust or because of presumed intention.
Constructive trusts are imposed by law to prevent unconscionable conduct, regardless of the intentions of the parties involved.
