Legal Definitions - equitable asset

An equitable asset refers to something of value that a person has a right to, not necessarily through direct legal ownership (like holding a title deed), but through principles of fairness and justice, as recognized and enforced by a court. While the formal legal title to the asset might be held by another party, the person with the equitable interest is considered the true owner or beneficiary in the eyes of equity, and they have the right to benefit from or control that asset.

Here are some examples to illustrate this concept:

• Beneficiary of a Trust Fund:

  Imagine a wealthy aunt sets up a trust fund for her niece, Sarah, to pay for her college education. The legal title to the money and investments within the trust is held by a bank, which acts as the trustee. Sarah, the niece, does not legally own the individual stocks or bank accounts directly.

  How it illustrates the term: Sarah has an equitable asset in the trust fund. Even though the bank holds the legal title, Sarah is the beneficiary and has an enforceable right to the assets and income according to the terms of the trust. A court would recognize her equitable interest and ensure the trustee manages the funds for her benefit.

• Real Estate Under Contract:

  A buyer, Maria, signs a purchase agreement to buy a house from a seller, David. Maria pays a substantial deposit and both parties agree on a closing date in two months. During this two-month period, the legal deed to the house is still in David's name.

  How it illustrates the term: Once the valid purchase contract is signed, Maria acquires an equitable asset in the house. Although David still holds the legal title, Maria has an enforceable right to the property based on the contract. If David were to try and sell the house to someone else before closing, a court would likely uphold Maria's equitable right to complete the purchase.

• Partnership Property:

  Two friends, Liam and Chloe, start a graphic design business together as partners. They invest money into the business, which then purchases computers, software licenses, and office furniture. The legal receipts or titles for these items might be in the business's name or even in Liam's name for convenience.

  How it illustrates the term: Both Liam and Chloe have an equitable asset in the partnership's property. While the specific legal ownership of each item might not be individually split or registered to both, each partner has a fair and enforceable right to a share of the overall partnership assets and profits. If the partnership were to dissolve, a court would ensure the assets are distributed equitably between them, reflecting their respective interests.