Home > Types of Trust > When is a Trust Constructive?

When is a Trust Constructive?

By: J.A.J Aaronson - Updated: 1 Oct 2012 | comments*Discuss
 
Constructive Trust Law Settlor Trustee

As is demonstrated throughout this site, there is a startling variety of types of trust. Bare trusts, for example, are distinct from accumulation and maintenance trusts or interest in possession trusts. In more general terms, however, there are two over-arching categories: constructive and express trusts.

An express trust arises when a settlor (that is, the individual setting up the trust) explicitly describes their wishes to establish it. This normally happens by way of a written document known as a trust instrument. Frequently trusts are established in a will, in which case the settlor is referred to as a testator. The means by which the trust is established, however, are secondary; the important factor is that the settlor has expressed a wish to do so.

Establishment

In contrast, a constructive trust is established without an explicit intention on the part of a settlor. Rather, these trusts come into being as a legal response to events that have occurred. There are a number of circumstances in which this might happen. Perhaps the most common type of constructive trust arises when a married couple, or civil partners, purchase property. In this case a constructive trust comes into being as the assumption is made that the property will be held in trust by each spouse for the other.

Frequently, however, constructive trusts arise as a response to illegal actions. Potentially confusingly, constructive trusts can sometimes be established as a result of wrongdoings concerning the management of an express trust. Trustees owe a fiduciary responsibility to the beneficiaries of an express trust, which requires them to subordinate their own interests to those of the beneficiaries.

Much important constructive trust case law arises from situations in which trustees breach this duty. If a trustee was to personally profit from their position at the expense of the trust, it has been established that a constructive trust may arise, into which the profit made by the trustee would be placed. This profit would be held in trust for the beneficiaries of the first, express trust, as recompense for the breach of fiduciary duty.

Controversy

There are a number of circumstances in which constructive trust law remains open to debate. It has been argued that, when an individual or organisation makes a financial error in another individual or organisation's favour, the party that has benefited should be considered to be holding the respective assets in constructive trust for the benefit of the party that made the error. This is rejected by many legal professionals, however.

As can be seen, constructive trusts tend to arise when something goes wrong. The establishment of a constructive trust is frequently demanded by plaintiffs in court as a suitable remedial action for a theft or similar offence. If, for example, an individual steals money and subsequently buys property with that money, the victim of the theft could demand that the property be held in constructive trust for their benefit. This is a complex and controversial area of law, and one in which professional advice should always be sought.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Topics
Latest Comments
  • Nuts
    Re: What is a Bare Trust?
    My Father-in-law bought a property for my daughter and had it registered in her name.He has since died but left a letter stating that he…
    27 November 2018
  • Nkosazana
    Re: How to Trace Whereabouts of Trust Funds?
    I'm a south African,My was half Swazi born in SA,We got married in Swaziland ,We had serious differences that…
    26 November 2018
  • Pablo
    Re: Revocable and Irrevocable Trusts
    My niece and her husband have bought a flat and put their parents in their to live rent free as my niece owes her parents…
    24 October 2018
  • Professor Trelawny
    Re: What is a Bare Trust?
    I set up a bare trust for my young daughter and bought a buy to let property. My husband and I are both trustees of the bare trust.…
    23 October 2018
  • Amanda
    Re: How to Trace Whereabouts of Trust Funds?
    I have found out that I was left a trust fund many years ago. It was from my grandma many years ago..The rest of…
    17 September 2018
  • Doroto
    Re: Reasons for Establishing a Living Trust
    I would love to know the answer to the question posed by Stephen, namely, whether living trusts can be set up in UK…
    5 September 2018
  • Dee
    Re: Can Conditions Be Put Into Adult Children's Trust Funds?
    My mother passed away lin 2016. Leaving the her estate to me and making it clear to all my…
    31 August 2018
  • Budsalt
    Re: What is a Bare Trust?
    I live in a small block of 4 Flats which is a registered as a Freehold Company. Each flat owner is a director of the Company except 1…
    23 August 2018
  • Bumpy
    Re: What is a Bare Trust?
    Is this site still active? I put a question in on 13th August and then nothing. Thanks
    17 August 2018
  • Bumpy
    Re: What is a Bare Trust?
    A small plot of land of negligible value (say £1000) is held in Bare Trust with a standard Trustee and Sole Beneficiary. If a third…
    13 August 2018