Legal Tip 157: The 3 Categories of Trusts

The 3 Categories of Trusts


There are 3 different ways trusts can arise


1. Express Trusts
The express trust is one deliberately set up. Ie. There was an express intention to set the trust up by someone such as a settlor or a testator of a will.

When most people think of trusts they are thinking of express trusts.

These include unit trusts, discretionary trusts, fixed trusts, SMSF and testamentary trusts


2. Resulting Trusts
A resulting trust is a trust which arises because of an implied intention.

A common way resulting trusts can arise is where A purchases property in B’s name. It will be presumed that B is the owner as trustee for A (where there is no family relationship between A and B). This is a rebuttable presumption – this is it can be disproved with evidence. A may have mean it as a gift to B.


3. Constructive Trusts
There are trusts which are ‘construed’ by the situation and they are imposed by the courts to prevent someone from benefitting from an unjust situation.

An example of a constructive trust may be where A steals B’s money and A buys a house in A’s name, the court may declare that A is legal owner of the house for B and order that title be transferred or the property be sold and the proceeds go to B. Until this happens A will still be the legal owner of the property, but on trust for B.


Another example is where Granny sells her house and constructs a granny flat with her money on land owned by her son. Later there is a fall out and the son kicks granny out. She is not the legal owner of the property and therefore could not recover her money. A court would declare that the son holds the property, perhaps in part, as trustee for granny.