SC: Trusts 2023
Marked by a split in
legal and equitable title.
GENERA CHARACTERISTICS OF A TRUST
I. Split of Legal and Equitable Title
Page a. Common law definition: fiduciary relationship in which one person (trustee) holds legal title to
|1 property for the benefit of another.
b. Beneficiary can enforce the trust in equity, thus giving the beneficiary an equitable interest in the
trust property.
II. Express and Implied Trusts
a. Express Trusts
i. Created in express terms by a transfer of legal title to a trustee or by a declaration of trust.
Declaration of trust is one in which the settlor retains legal title, but declares that the
property is being held for the benefit of others.
1. Inter vivos trust: a trust created by a settlor during his or her lifetime
2. Testamentary trust: a trust created in a will
ii. Statute of Uses: if a person holds title to land for the benefit of another person, the legal title
holder must have some duties to perform in order for a trust to be validly created.
1. Statute does not apply to trusts of personalty
b. Implied Trusts
i. Resulting Trust: when legal title is conveyed with the intent that someone other than the
holder of the legal title is to enjoy the beneficial interest, but an express trust is not
effectively created.
1. When the purchase price is paid by one person and title is taken in the name of
another, there is a rebuttable presumption of trust.
2. Presumption of a gift (not a trust) when the transferee is a person whom the
transferor is obligated to support or is a natural object of the transferor’s bounty; in
this instance; rebutted by parol evidence
a. Bowen v. Bowen (2003): a prenuptial agreement that all property rights are to
be determined as if the parties were single will cause the normal presumption
of a gift to the spouse to be inapplicable.
b. Settlemeyer v. McCluney (Ct. App. 2004): Neither a resulting nor a
constructive trust will be imposed in favor of a person who has put title in
another’s name for a fraudulent purpose.
c. Jocoy v. Jocoy (Ct. App. 2002): When title is placed in the name of a son-in-law
or daughter-in-law, no gift should be presumed.
3. When S conveys property to T in trust, but the trust fails, T may be found to hold legal
title to the property in resulting trust for the benefit of S. There was no intent for T to
benefit from the property, therefore, T is required to convey legal title to S.
a. If an inter vivos trust fails for illegality, a resulting trust may not necessarily
arise.
4. When a trust originally takes effect, but the beneficiary later goes out of existence, or
the trust purposes are completed before trust property is exhausted, the remaining
trust corpus is held in a resulting trust in favor of the settlor or the settlor’s estate.
ii. Constructive Trust: When legal title is obtained by some fraud or other wrongdoing on the
part of the recipient or when beneficiary enjoyment of property by the legal title holder would
be inequitable, the court may impose a trust upon the property, declaring that the legal title
is held for the benefit of the person who is entitled to beneficial enjoyment.
1. A constructive trust need not be in writing, since it is “implied in law.”
a. Other remedies include equitable liens or right of subrogation.
b. A BFP from a constructive trustee of property, for value, without notice of the
constructive trust, takes the property fee and clear of the trust.
iii. Comparison:
1. Resulting trust arises when circumstances raise an inference that the settlor does not
intend that the person holding title shall have the beneficial interest
2. Constructive Trust is imposed, not to effectuate intention, but to redress wrong of
unjust enrichment.
iv. Tracing:
1. Where funds have been obtained or retained by fraud, a constructive trust or an
equitable lien may be imposed on the property into which the wrongfully obtained or
retained funds have been converted.
, SC: Trusts 2023
a. If, however, wrongfully obtained funds or property are used for making
improvements upon the wrongdoer’s property, only an equitable lien is
available and not a constructive trust.
Page 2. When the trustee of an express or constructive trust is insolvent, the beneficiary has a
|2 preference over general creditors of the trustee (if the trust property is identifiable)
a. When an insolvent trustee of an express trust has commingled trust funds
with his own funds, if the beneficiary can trace the trust funds, he has a
preferred right to those funds.
b. If the beneficiary of a trust cannot trace trust funds after the comingling, the
his status is that of a general creditor even though he can show his trust
property augmented the general assets of the insolvent trustee.
3. If a person wrongfully uses property of another in discharging a lien against his own
property, the beneficiary is entitled to be subrogated to the rights of the third party
under the lien.
III. Private and Charitable Trusts Distinguished
a. Private Trust: one created for the benefit of certain designated individuals, clearly identified under
the terms of the trust
b. Charitable Trust: one created for the benefit of an uncertain class or the public generally
IV. Other Forms of Property Ownership and Fiduciary Relationships Distinguished
a. Forms of property ownership and fiduciary relationships which bear similarities to trusts, but are not
trusts either because equitable and legal title are held in the same person or because there is no trust
property.
i. Examples of relationships that are not trusts:
1. Bailments;
2. Debts;
3. Third party beneficiary contracts;
4. Mortgages; and
5. Sales contracts.
6. Agency;
7. Personal representative;
8. Guardian; and
9. Custodian under the Uniform Gift to Minors Act.
CREATION OF A TRUST
I. Intent to Create Trust
a. Intent to Split Title: settlor must manifest an intention to split legal and quotable tile in order to
create an express trust, but no special working or conduct is necessary.
i. Use of the word “trust” does not create a trust if title is not split
b. Precatory Terms not Sufficient: words used to create a trust also create enforceable duties.
i. Precatory terms are sometimes construed to be mandatory if, in the whole context, a
mandatory character is indicated.
II. Capacity to Create Revocable Trust: requires the same capacity as required to execute a valid will.
III. Statute of Limitations – Challenging a Revocable Trust: challenges must be brought within one year after
settlors death or 120 days after settlor gives notice of the trust, including a copy of the trust and a
statement warning of the limitations period to contest, whichever is earlier.
IV. Elements of Trust
a. Property of the Trust: both tangible and intangible property may be the subject of a trust.
i. A mere expectancy is not property and therefore cannot be the subject of the trust.
ii. If an attempt to create a trust fails because the settlor does not yet own the intended trust
property, but the settlor later acquires the property, the trust arises upon the subsequent
acquisition of the property only if the settlor manifests again at that time his intent to create
a trust.
iii. Fact that a property interest is revocable, terminable, fractional, indivisible, intangible,
equitable, or subject to divestment or lapse does not make that interest unascertainable in
trust.
iv. Pour Over Exception: allows a person to devise assets at death into an inter-vivos trust that is
recognized as having been created during the lifetime of the testator even though no assets
were put into the trust until testator’s death.
Marked by a split in
legal and equitable title.
GENERA CHARACTERISTICS OF A TRUST
I. Split of Legal and Equitable Title
Page a. Common law definition: fiduciary relationship in which one person (trustee) holds legal title to
|1 property for the benefit of another.
b. Beneficiary can enforce the trust in equity, thus giving the beneficiary an equitable interest in the
trust property.
II. Express and Implied Trusts
a. Express Trusts
i. Created in express terms by a transfer of legal title to a trustee or by a declaration of trust.
Declaration of trust is one in which the settlor retains legal title, but declares that the
property is being held for the benefit of others.
1. Inter vivos trust: a trust created by a settlor during his or her lifetime
2. Testamentary trust: a trust created in a will
ii. Statute of Uses: if a person holds title to land for the benefit of another person, the legal title
holder must have some duties to perform in order for a trust to be validly created.
1. Statute does not apply to trusts of personalty
b. Implied Trusts
i. Resulting Trust: when legal title is conveyed with the intent that someone other than the
holder of the legal title is to enjoy the beneficial interest, but an express trust is not
effectively created.
1. When the purchase price is paid by one person and title is taken in the name of
another, there is a rebuttable presumption of trust.
2. Presumption of a gift (not a trust) when the transferee is a person whom the
transferor is obligated to support or is a natural object of the transferor’s bounty; in
this instance; rebutted by parol evidence
a. Bowen v. Bowen (2003): a prenuptial agreement that all property rights are to
be determined as if the parties were single will cause the normal presumption
of a gift to the spouse to be inapplicable.
b. Settlemeyer v. McCluney (Ct. App. 2004): Neither a resulting nor a
constructive trust will be imposed in favor of a person who has put title in
another’s name for a fraudulent purpose.
c. Jocoy v. Jocoy (Ct. App. 2002): When title is placed in the name of a son-in-law
or daughter-in-law, no gift should be presumed.
3. When S conveys property to T in trust, but the trust fails, T may be found to hold legal
title to the property in resulting trust for the benefit of S. There was no intent for T to
benefit from the property, therefore, T is required to convey legal title to S.
a. If an inter vivos trust fails for illegality, a resulting trust may not necessarily
arise.
4. When a trust originally takes effect, but the beneficiary later goes out of existence, or
the trust purposes are completed before trust property is exhausted, the remaining
trust corpus is held in a resulting trust in favor of the settlor or the settlor’s estate.
ii. Constructive Trust: When legal title is obtained by some fraud or other wrongdoing on the
part of the recipient or when beneficiary enjoyment of property by the legal title holder would
be inequitable, the court may impose a trust upon the property, declaring that the legal title
is held for the benefit of the person who is entitled to beneficial enjoyment.
1. A constructive trust need not be in writing, since it is “implied in law.”
a. Other remedies include equitable liens or right of subrogation.
b. A BFP from a constructive trustee of property, for value, without notice of the
constructive trust, takes the property fee and clear of the trust.
iii. Comparison:
1. Resulting trust arises when circumstances raise an inference that the settlor does not
intend that the person holding title shall have the beneficial interest
2. Constructive Trust is imposed, not to effectuate intention, but to redress wrong of
unjust enrichment.
iv. Tracing:
1. Where funds have been obtained or retained by fraud, a constructive trust or an
equitable lien may be imposed on the property into which the wrongfully obtained or
retained funds have been converted.
, SC: Trusts 2023
a. If, however, wrongfully obtained funds or property are used for making
improvements upon the wrongdoer’s property, only an equitable lien is
available and not a constructive trust.
Page 2. When the trustee of an express or constructive trust is insolvent, the beneficiary has a
|2 preference over general creditors of the trustee (if the trust property is identifiable)
a. When an insolvent trustee of an express trust has commingled trust funds
with his own funds, if the beneficiary can trace the trust funds, he has a
preferred right to those funds.
b. If the beneficiary of a trust cannot trace trust funds after the comingling, the
his status is that of a general creditor even though he can show his trust
property augmented the general assets of the insolvent trustee.
3. If a person wrongfully uses property of another in discharging a lien against his own
property, the beneficiary is entitled to be subrogated to the rights of the third party
under the lien.
III. Private and Charitable Trusts Distinguished
a. Private Trust: one created for the benefit of certain designated individuals, clearly identified under
the terms of the trust
b. Charitable Trust: one created for the benefit of an uncertain class or the public generally
IV. Other Forms of Property Ownership and Fiduciary Relationships Distinguished
a. Forms of property ownership and fiduciary relationships which bear similarities to trusts, but are not
trusts either because equitable and legal title are held in the same person or because there is no trust
property.
i. Examples of relationships that are not trusts:
1. Bailments;
2. Debts;
3. Third party beneficiary contracts;
4. Mortgages; and
5. Sales contracts.
6. Agency;
7. Personal representative;
8. Guardian; and
9. Custodian under the Uniform Gift to Minors Act.
CREATION OF A TRUST
I. Intent to Create Trust
a. Intent to Split Title: settlor must manifest an intention to split legal and quotable tile in order to
create an express trust, but no special working or conduct is necessary.
i. Use of the word “trust” does not create a trust if title is not split
b. Precatory Terms not Sufficient: words used to create a trust also create enforceable duties.
i. Precatory terms are sometimes construed to be mandatory if, in the whole context, a
mandatory character is indicated.
II. Capacity to Create Revocable Trust: requires the same capacity as required to execute a valid will.
III. Statute of Limitations – Challenging a Revocable Trust: challenges must be brought within one year after
settlors death or 120 days after settlor gives notice of the trust, including a copy of the trust and a
statement warning of the limitations period to contest, whichever is earlier.
IV. Elements of Trust
a. Property of the Trust: both tangible and intangible property may be the subject of a trust.
i. A mere expectancy is not property and therefore cannot be the subject of the trust.
ii. If an attempt to create a trust fails because the settlor does not yet own the intended trust
property, but the settlor later acquires the property, the trust arises upon the subsequent
acquisition of the property only if the settlor manifests again at that time his intent to create
a trust.
iii. Fact that a property interest is revocable, terminable, fractional, indivisible, intangible,
equitable, or subject to divestment or lapse does not make that interest unascertainable in
trust.
iv. Pour Over Exception: allows a person to devise assets at death into an inter-vivos trust that is
recognized as having been created during the lifetime of the testator even though no assets
were put into the trust until testator’s death.
