Legal Definitions - Resulting Trust

A resulting trust is a legal principle where property that was placed into an express trust automatically returns to the person who originally put it there (the "settlor") under specific circumstances. This happens when the original trust, for some reason, either fails completely or doesn't fully use or distribute all the property it was intended to manage. It acts as a default mechanism to prevent property from being left in legal limbo when an intended trust doesn't fully achieve its purpose.

Here are some examples illustrating how a resulting trust might arise:

• Surplus Funds After Purpose Fulfilled:

  Imagine a grandmother sets up a trust fund with $100,000 specifically to cover her grandson's undergraduate tuition and living expenses. The trust document specifies this sole purpose. However, the grandson later receives a full academic scholarship that covers all his tuition and living costs. After paying for a few books and minor fees, there is still $95,000 remaining in the trust, and the original purpose (paying for tuition and living expenses) has been largely fulfilled by other means.

  How it illustrates a resulting trust: Since the express trust's purpose has been met and there's a significant surplus of funds for which no further instruction was given in the trust document, a resulting trust would typically arise. The remaining $95,000 would revert to the grandmother (or her estate if she has passed away), as the original settlor of the funds.

• Trust Purpose Becomes Impossible or Obsolete:

  Consider a wealthy individual who establishes a trust to fund the development of a specific, experimental medical device. The trust is endowed with a substantial sum, and a trustee is appointed to manage the research grants. However, before all the funds are disbursed, a major technological breakthrough makes the specific device the trust was meant to fund completely obsolete and unnecessary, with a superior, widely available alternative now on the market.

  How it illustrates a resulting trust: The original, express purpose of the trust has become impossible or redundant. Since the trust document did not specify what should happen to the funds if the research became obsolete, the remaining funds in the trust would revert to the individual who created the trust (or their estate) through a resulting trust.

• Failure to Identify Beneficiaries:

  A person creates a trust in their will, leaving a significant portion of their estate "for the benefit of all my dearest companions." However, the will provides no clear criteria or mechanism for the trustee to identify who qualifies as a "dearest companion," making it legally impossible to determine the beneficiaries and distribute the assets as intended.

  How it illustrates a resulting trust: The express trust fails because its beneficiaries are too uncertain to be legally identifiable, meaning the trustee cannot carry out the trust's instructions. In this scenario, the property designated for this failed trust would revert to the deceased person's estate via a resulting trust, to be distributed according to other provisions of the will or intestacy laws.