Legal Definitions - Purchase Money Resulting Trust

A Purchase Money Resulting Trust is a legal concept used when two or more individuals contribute funds to purchase a property, but the legal ownership (the title) is placed solely in the name of only one of those contributors. In such situations, the law presumes that the person holding the title is doing so "in trust" for the other contributors, especially if the title holder dies without a will.

This legal mechanism is often applied in relationships like domestic partnerships or among family members and friends to ensure fairness. It prevents the title holder's estate from unfairly benefiting from the financial contributions of others who helped purchase the property. For a Purchase Money Resulting Trust to be recognized, the non-title holding party must have provided actual financial contribution (known as "consideration") towards the property's purchase.

Here are some examples:

• Example 1: Unmarried Partners

  Liam and Maya are an unmarried couple who have lived together for ten years. They decide to buy a house, with Liam contributing 60% of the down payment and Maya contributing 40%. For convenience, and because Liam had a slightly better credit score at the time, the legal title to the house is placed solely in Liam's name. Five years later, Liam tragically dies without a will. Liam's distant relatives, who are his legal heirs, claim full ownership of the house.

  How it illustrates the term: Maya contributed significantly to the purchase of the house but was not on the legal title. Liam, the title holder, died without a will. A Purchase Money Resulting Trust would allow Maya to claim her 40% share of the property, recognizing her financial contribution and preventing Liam's relatives from unjustly inheriting the entire house.

• Example 2: Siblings Investing Together

  Sisters Chloe and Dana decide to purchase a small apartment building as an investment property. Chloe provides 75% of the purchase price, and Dana contributes 25%. They agree to put the title solely in Dana's name because Dana lives closer to the property and will manage it day-to-day. Unexpectedly, Dana passes away without a will, and her children believe they are entitled to the entire property.

  How it illustrates the term: Chloe made a substantial financial contribution (75%) to the property's purchase, while Dana held the sole legal title. Dana died intestate. A Purchase Money Resulting Trust would ensure that Chloe's financial interest is recognized, allowing her to claim her 75% share of the apartment building, rather than Dana's children inheriting the full value unfairly.

• Example 3: Friends Buying a Shared Asset

  Three friends, Noah, Olivia, and Peter, decide to buy a boat together for recreational use. Noah contributes 50% of the purchase price, Olivia contributes 30%, and Peter contributes 20%. To simplify registration and insurance, they agree to put the boat's title solely in Noah's name. A year later, Noah dies suddenly in an accident without leaving a will. Noah's family believes they now own the entire boat.

  How it illustrates the term: Olivia and Peter both contributed financially to the purchase of the boat, but Noah held the sole legal title. Noah died intestate. A Purchase Money Resulting Trust would allow Olivia and Peter to assert their respective 30% and 20% ownership interests in the boat, preventing Noah's estate from unjustly acquiring the full asset despite their contributions.