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Trusts • Trusts as a Matter of Law
TRUSTS#026
Legal Definition
A resulting trust is an implied-in-fact trust based upon the presumed intent of the parties, and transfers the property to the settlor or their estate.
It arises when: (1) an express trust ends by its own terms; (2) a private trust fails because there is no beneficiary; (3) a charitable trust ends and cy pres cannot be used; (4) a private express trust fails after creation because it becomes illegal; (5) there is excess corpus in a private express trust; (6) a settlor creates a purchase money resulting trust; or (7) a settlor creates a semi-secret trust.
It arises when: (1) an express trust ends by its own terms; (2) a private trust fails because there is no beneficiary; (3) a charitable trust ends and cy pres cannot be used; (4) a private express trust fails after creation because it becomes illegal; (5) there is excess corpus in a private express trust; (6) a settlor creates a purchase money resulting trust; or (7) a settlor creates a semi-secret trust.
Plain English Explanation
The government hates not knowing who owns stuff. The idea of property without an owner causes all sorts of issues. Thus, when a trust ends, or fails, or otherwise is no longer able to continue, but it still has money or assets in it, that property is transferred back to whoever originally created the trust. If the original trust creator is not alive, then the property goes back to their estate. There are several scenarios where resulting trusts occur and leftover assets are given back to the trust's creator:
(1) Where a trust ends by its own terms. For example, if the trust only lasts for 10 years, or until a person graduates from college.
(2) Where a trust for a specific beneficiary cannot continue because the beneficiary dies.
(3) When a charitable trust ends and the courts cannot identify another charity to give the remaining funds to.
(4) When the purpose of a trust becomes illegal. For example, if a trust was created in the 1970's for the sole purpose of hunting whales, the trust would fail in 1986 when the United States signed onto a treaty banning whale hunting.
(5) When there is "excess corpus," which means "leftover money" from a specific purpose of the trust. For example, if a trust was created for the purpose of building a hospital, but after the hospital is built, there is still $5,000 left in the trust. That money is "excess corpus" and since the trust's purpose has been completed, the leftover money is returned to the original creator of the trust.
(6) "Purchase money resulting trusts" don't exist in many states, but it's still worth knowing. They happen when Bob pays for a piece of property (real property or personal property), but has the seller give title of that property to Sam. Thus, Sam owns the property and, if Sam were to die, rather than the property going to Sam's heirs, it would find its way back to Bob via a resulting trust.
(7) As you've learned in another card, a semi-secret trust is a type of failed trust where it someone tries to create a trust but fails to name a beneficiary.
(1) Where a trust ends by its own terms. For example, if the trust only lasts for 10 years, or until a person graduates from college.
(2) Where a trust for a specific beneficiary cannot continue because the beneficiary dies.
(3) When a charitable trust ends and the courts cannot identify another charity to give the remaining funds to.
(4) When the purpose of a trust becomes illegal. For example, if a trust was created in the 1970's for the sole purpose of hunting whales, the trust would fail in 1986 when the United States signed onto a treaty banning whale hunting.
(5) When there is "excess corpus," which means "leftover money" from a specific purpose of the trust. For example, if a trust was created for the purpose of building a hospital, but after the hospital is built, there is still $5,000 left in the trust. That money is "excess corpus" and since the trust's purpose has been completed, the leftover money is returned to the original creator of the trust.
(6) "Purchase money resulting trusts" don't exist in many states, but it's still worth knowing. They happen when Bob pays for a piece of property (real property or personal property), but has the seller give title of that property to Sam. Thus, Sam owns the property and, if Sam were to die, rather than the property going to Sam's heirs, it would find its way back to Bob via a resulting trust.
(7) As you've learned in another card, a semi-secret trust is a type of failed trust where it someone tries to create a trust but fails to name a beneficiary.
Hypothetical
Hypo 1: Sam creates a trust to take care of his elderly mother Betty. The trust is funded with $500,000, with instructions to use the money for Betty's living expenses. Betty passes away after only $100,000 has been spent. Since the purpose of the trust is gone, the remaining $400,000 results back to Sam. Result: The trust was specifically created to provide for Betty during her lifetime. Now that she has passed away, the original intent behind the trust has ended. Thus, the remaining unused assets return back to the trust creator through a resulting trust.
Hypo 2: Bob creates a trust to fund a new children's hospital wing. $2 million is put into the trust for this purpose. After the wing is built, there is still $200,000 left over in the trust. Result: The extra $200,000 is considered "excess corpus" - it was not needed to fulfill the trust's purpose of building the hospital wing. Since it was not specifically gifted for any other purpose, it results back to Bob through a resulting trust.
Hypo 2: Bob creates a trust to fund a new children's hospital wing. $2 million is put into the trust for this purpose. After the wing is built, there is still $200,000 left over in the trust. Result: The extra $200,000 is considered "excess corpus" - it was not needed to fulfill the trust's purpose of building the hospital wing. Since it was not specifically gifted for any other purpose, it results back to Bob through a resulting trust.
