A constructive trust is different from other types of trusts. It is not created as an expression of the intent of the person who establishes the trust. Instead, it is created by the courts when the wrong person has been given the title to trust property. The purpose of this type of trust is to serve as a remedial measure. If you are an intended beneficiary and you believe this type of trust is necessary, contact our Long Beach trust attorneys to explain how a constructive trust works.
Why would a court establish a constructive trust?
In situations where title to estate property has been given to someone who, in fairness, should not have received the property for whatever reason, a court can step in and correct that situation. There are many different reasons why this type of court intervention may be necessary, but usually, it is because of a mistake or some type of unconscionable conduct. A constructive trust is not a real trust, as it is commonly recognized. Instead, it is a passive arrangement created temporarily for the sole purpose of transferring title of the subject property to the appropriate beneficiary.
The legal theory upon which a constructive trust is based
The legal theory that drives the creation of a constructive trust is that a person who has obtained title or ownership in property, when that person should not have that title, has an equitable duty to transfer said property to the person to whom it rightfully belongs. Failing to do so would result in that person being “unjustly enriched” by being allowed to retain the property. If you have questions about whether this situation applies to you, talk to our Long Beach trust attorneys. The party that is aggrieved (i.e., the party who should have received the property) can choose a constructive trust as a remedy or some other remedy, such as money or other injunctive relief. However, they cannot have both.
What situations require the use of a constructive trust remedy?
There are various different reasons why a constructive trust may be necessary to remedy the improper or unlawful ownership of trust property. Some of those reasons include:
- Mistake
- Undue Influence
- Duress
- Fraudulent Misrepresentation Or Concealment
- Property Obtained By Homicide
- Gift By Will Or Intestacy Based Upon Broken Promise
- Breach Of Express Trust By Disloyalty
- Breach Of Duty In Direct Dealing With Beneficiary
If you believe any of these situations may apply to you, then you should discuss your situation with one of our Long Beach trust attorneys.
Undoing a gift by will or intestacy based upon broken promise
This situation refers to a property owner being induced to make a gift of property to someone in reliance on an oral promise that the assets being used in a particular way. The person who received the property then breaks that promise. Another example of this is when a person is persuaded not to leave a will or other estate planning document based on the promise of another to distribute the property in the manner the property owner desires. In this situation, the court may decide to create a constructive will in order to get the property in the right hands.
Breach of duty in direct dealing with beneficiary
A trustee of a trust has certain duties to beneficiaries, including making complete disclosures and treating each beneficiary with complete fairness if there are direct conveyances, contracts or other financial or property transactions involved. The trustee’s duty extends to every person who serves as a fiduciary or has a confidential relationship. The reasoning is that people in fiduciary positions, serving as trustees are in a position of superiority and dominance so there is a risk of overreaching and undue influence.
Requesting professional advice regarding trust administration
In the face of the significant responsibility placed upon a trustee, it is very common for trustees to need advice or assistance from a professional as they carry out certain aspects of their responsibilities. This is most likely the case when it comes to investing the trust property. If you do not have experience with investments then it would be wise to seek the advice of a professional. The management of investments is the probably the most frequently litigated issue in Los Angeles trust administration.
If you have questions regarding estate planning, trust contests, or any other trust administration issues, please contact the Schomer Law Group either online or by calling us in Los Angeles at (310) 337-7696, and in Orange County at (562) 346-3209.
#estateplanning, #schomerlawgroup, #constructivetrusts
- Things You May Need to Update in Your Estate Plan When You Enter Retirement - March 22, 2023
- 10 Estate Planning Tips You Cannot Afford to Ignore - March 21, 2023
- 7 Estate Planning Steps for the Beginner - March 16, 2023
