Chapter 3: Resulting Trust

• Resulting trusts


  Implied by law based on the presumed but unexpressed intention of the settlor. Under a resulting trust, the equitable interest reverts back to the settlor, or to the settlor's estate if the settlor is dead.
• Types of resulting trusts

  • Trusts arising following a voluntary transfer or purchase in the name of another
  • Trusts arising on failure to exhaust the beneficial interest under an express trust
• Voluntary transfer and purchase money resulting trusts


  • Where an individual, X, transfers the legal title in property to another, Y, without consideration and there is no evidence before or at the time of the transfer of the reason why it has been made, the general rule is that equity presumes that X did not intend to make a gift and Y holds the property on resulting trust for X
  • Y's sole duty is to convey his title to X
• Voluntary transfer resulting trust

  • Xavier transfers his shares in X Co Ltd to his friend Yasmin. Yasmin will be presumed to hold the shares on trust for Xavier and will be expected to convey title to the shares back to Xavier when Xavier so requests.
• Providing purchase money resulting trusts

  • Where, on the purchase of real or personal property, X provides the purchase money but the legal title is transferred to Y, the general presumption is that Y holds the legal title on resulting trust for X
  • If X and Y both contribute to the purchase money but the property is transferred into Y's name alone, it is presumed that Y holds on trust for himself and X in proportion to their respective contributions
• Providing purchase money resulting trust

  • Xavier agrees with his friend Yasmin that they will purchase a flat together. Xavier contributes £60,000 toward the purchase price and Yasmin contributes £40,000, but title is taken only in Yasmin's name. Yasmin will be presumed to hold the legal title on trust for herself and Xavier, with Xavier having a 60% beneficial interest and Yasmin having a 40% interest.
• Consideration for purchase money resulting trust

  • The consideration paid by X must be for purchase of the property, Sums paid by X to make improvements on the property or to pay taxes on it do not give rise to a resulting trust
  • The consideration (or obligation to pay) must be supplied at or before the time Y takes title
• Burden of proof for purchase money resulting trust

  • The burden is on X, the party claiming to be the beneficiary of a resulting trust, to prove by clear and convincing evidence that they supplied the consideration.
• Rebutting presumption of resulting trust

  • Y, the title holder and alleged trustee, may rebut the presumption by submitting evidence that no trust was intended and that, to the contrary, the money used as consideration for the purchase was: (1) a gift from X to Y: (2) a loan from X to Y: or (3) payment by X of a debt owing to Y.
• Presumption of advancement


  The presumption of resulting trust does not apply in certain specitic cases where X is treated as being under a moral obligation to make financial provision for Y. This outdated presumption applies where: X is Y's husband or fiancé, X is Y's father, and X stands in loco parentis to Y (that is, X has taken on parental duties in relation to Y). In cases where the presumption of advancement applies, it is presumed that X intended to make a gift to Y.
• Presumption of advancement


  • A father transfers his shares in X Co Ltd to his daughter. A gift is presumed.
• Limitation of presumption of advancement

  • Although the presumptions do not reflect modern conditions, there is no authority to apply them to transfers from wife to husband or mother to child. However, the 'loco parentis category has been applied to a transfer from mother to child, where the mother had sole responsibility for the child as a Single parent.
• Rebutting presumption of advancement


  • Once the presumption of advancement has arisen, X, the transferor or provider of purchase money, may rebut it by providing evidence to show that they did not intend to make a gift but instead intended to retain an equitable interest in the property.
• Evidence admissible to rebut presumptions

  • Evidence of the surrounding circumstances at the time of the transfer is admissible. Courts tend to use such evidence to reduce the discriminatory effect of the presumption of advancement.
  • Only evidence of acts and declarations made by an individual before or at the time of the purchase or transfer will be admissible in support of that individual's claim.
• Evidence of surrounding circumstances

  • A mother transfers shares to her adut son on his birthday but gives no explanation. The presumption of resulting trust applies, but the court is likely to conclude that a birthday gift was intended.
  • A husband transfers cash into a bank account in the joint names of himself and his wife. The presumption of advancement applies. Evidence to suggest that the reason for opening the account was convenience rather than a gift may be sufficient to rebut the presumption and enable the husband to show that the money is his alone.
• Evidence of acts and declarations

  • A father transfers his shares in X Co Ltd to his daughter. Subsequently he continues to treat the shares as his own, receiving and spending the dividend payments. The presumption of advancement applies. Evidence of the father's actions after the transfer is not admissible in support of his claim that he did not intend to make a gift.
• Evidence of illegal or fraudulent motive


  • If the property transfer was made as part of an illegal or fraudulent transaction, the court must decide whether it is In the public interest to allow a claim. The court takes into account all relevant factors, including the underlying purpose of the relevant law and the respective conduct of the parties.
• Evidence of illegal or fraudulent motive

  • A father, fearing that his personal property may be at risk if his business fails, transfers assets into the name of his son. The presumption of advancement applies. The father attempts to reclaim the assets by explaining to the court that he did not intend to make a gift to his son, but that his intention was to hide the assets from his creditors should his business fail. The court has discretion to grant the claim after considering all relevant factors.
  • A and B, an unmarried couple, both contribute to the purchase of a fat, but it is transferred into the name of A alone so that B can make a fraudulent claim for government benefits. The relationship breaks down and B claims a share in the flat under resulting trust principles. The court has discretion as to whether to enforce the claim.
• Resulting trusts arising on failure of express trust


  A resulting trust arises where S, the settlor, creates an express trust and conveys legal title to T, the trustee, but the declared trust fails to dispose of the entire equitable interest or fails for some other reason (for example, failure of contingent interest: lack of certainty). T was never intended to have beneficial ownership and so T now holds on resulting trust for S. T has no management duties as trustee: T's duty as trustee of the resulting trust is simply to convey title back to S. If S is dead, S's estate is the beneficiary.
• Resulting trusts arising on failure of express trust

  • Failure of a contingent interest: Steven transfers property to trustees to hold on trust for Xena, provided Xena attains the age of 21. Xena dies aged 19. Xena's contingent interest has failed. In the absence of any further provision in the trust instrument, the trustees hold on trust for Steven and must transfer the property back to him.
  • Failure of trust due to lack of certainty of objects: In his will, Thomas gives the residue of his estate to trustees to hold on trust for "my old friends in equal shares". The trust fails for lack of certainty of objects; thus, the trustees hold on resulting trust for Thomas's estate. in the absence of further provisions in the will, the property passes to Thomas's next of kin under the intestacy rules.
  • Failure of half secret trust for lack of communication: In her wil, Tilly gives *15,000 to my Trustees ta hold on the trusts which I have communicated to them". No communication was made. The attempted half secret tust bas faled and the trustees hoid the £5,000 on resulting trust for inose entitied to the residue of the estate under the wil.