Estate Planning Newsletter
Correcting Mistakes in Trust Distribution
There may be instances where property under a trust is transferred to the wrong beneficiary. This transfer can be corrected through a remedy called a resulting trust or an implied trust. Do not confuse a resulting trust, which is created by the court to remedy some error, from an express trust, which is a trust expressly created by a person (the trustor or settlor) who designates a trustee to manage assets or property for the benefit of trust beneficiaries.
When a Resulting Trust Is Imposed
A resulting trust is typically imposed by a court, and may occur under any of the following situations:
- Failure of an express trust (due to unclear intentions or inherent illegality)
- A need to determine who is to receive property that remains after an express trust has been administered and property has been distributed
- A person acquires property that was not meant to be a gift to him/her
Resulting trusts are different from other trusts, in that they are:
- Involuntary – Imposed by law, rather than being voluntarily created.
- Not a Constructive Trust – Imposed because of a good faith error, instead of the fraudulent transfer or undue influence that characterizes constructive trusts.