Resulting trust

An implicit trust created by operation of law, either by presumption or automatically. This is because ‘the person in whose favour the trust arises is the person who provided the property or equitable interest vested in the person bound by the trust’. The two typical cases of resulting trust arise where a trust fails (automatic), and where there has been an apparent gift (presumed).

In the first case, where a trust fails because the transfer leaves some or all of the beneficial interest undisposed of, a resulting trust is automatic. Equity dictates that the person who has the title to the property is holding it on trust for the original owner or for the person who gave value for it. Such a resulting trust may arise where the beneficiary has transferred or directed legal title over the trust property to the trustee.

In the second case, when property is transferred without consideration to constitute an apparent gift, a court of equity will presume that it is either an advancement or it is being held on resulting trust for the transferor, and presume the existence of a trust. The recipient must prove the goods or assets to be a gift, or the resulting trust will be presumed in favour of the transferor.

Additional reading:

The Complete Guide to Trading Trusts for small and medium-sized business