Legal Tip 106: Resulting Trusts

Discussion in 'Legal Issues' started by Terry_w, 3rd Dec, 2015.

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  1. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

    18th Jun, 2015
    Where A provides money for a property purchased in the name of B it will be presumed that B holds the property in trust for A. This is known as a “resulting trust”. It is an implied trust because equity presumes there was an intention to create a trust. This is a rebuttable assumption which can be rebutted by evidence – such as a loan agreement between A and B etc.

    This has important implications in the area of asset protection.

    For example
    A buys a property from Mr X and directs Mr X transfer the title into B’s name, it will be presumed that spouse B holds the property on trust for A.

    Another example
    Dr Tom wants to ‘own’ property in a discretionary trust for asset protection reasons. Tom is in a high risk area of work – he could be sued. So Tom goes out and negotiates on a property signs a contract as 'Dr Tom and/or nominee', pays the deposit and then nominates the trustee company as owner. Tom has just ruined all the ‘asset protection’ he almost achieved as it could be presumed that the trustee company owns the property as trustee for Tom.

    And this doesn't just apply to real property such as land and houses, it can apply to all sorts of property including bank accounts, including joint accounts. It can apply to joint purchases of property where only 1 has provided the funds. However where husband and wife are involved it may be presumed that where funds came from just one of them it was by way of a gift of 50% to the other, but this is also a rebuttable presumption.

    How could Dr Tom avoided this problem above? Firstly not signing the contract himself, but have the trustee company sign (him as director). And secondly having a written loan agreement in place before the deposit money changes hands is also important to rebutt the presumption of resulting trust..
    Elives likes this.