Core principles of trust law - Resulting trusts

Learning Outcomes

After reading this article, you will be able to explain what a resulting trust is, distinguish automatic from presumed resulting trusts, and apply these to exam scenarios. You will be able to identify when a resulting trust arises, explain relevant legal presumptions, and advise on the practical consequences for parties involved. You will be able to apply these principles to realistic client scenarios and address common exam pitfalls.

SQE2 Syllabus

For SQE2, you are required to understand the operation of resulting trusts and be able to identify when they arise in client matters or disputes. Key revision focuses include:

• Understanding what a resulting trust is and how it operates in equity.
• Distinguishing between automatic resulting trusts and presumed resulting trusts.
• Identifying factual situations that give rise to resulting trusts.
• Applying presumptions of advancement and rebutting resulting trusts.
• Advising clients on the practical impact of a resulting trust.
• Recognising and explaining resulting trust principles in co-ownership, voluntary transfer, and failed trusts scenarios.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is a resulting trust and why does it arise?
2. True or false? If T gives £40,000 to C, equity presumes T intended to make a gift.
3. What is the difference between an automatic resulting trust and a presumed resulting trust?
4. Give an example of a situation where a resulting trust will arise.
5. Explain the concept of the presumption of advancement.

Introduction

Resulting trusts are a core equitable doctrine that allocate beneficial ownership of property where the legal title and the equitable interest do not match the presumed intent, or where an express trust fails. For SQE2, you need to advise clients and apply resulting trust principles to factual situations involving failed trusts, co-ownership disputes, or voluntary transfers without clear evidence of gift. Understanding when and why a resulting trust arises is an assessment-critical skill.

The Meaning and Function of Resulting Trusts

A resulting trust occurs when an individual holds legal title to property but, in equity, must either return or "result" the beneficial interest (or part of it) back to another, typically because the transferor did not intend to make a gift to the transferee or because a trust has failed. The trust "results"—comes back—to the contributor or settlor, unless there is evidence of a true gift.

Key Term: resulting trust
An equitable doctrine where the beneficial interest in property is held for the person who provided value or for the settlor, unless shown to be a gift.

Resulting trusts ensure proper allocation of property and prevent unintended enrichment.

When Do Resulting Trusts Arise?

Resulting trusts most commonly arise in two situations:

1. Where there is an incomplete, invalid, or otherwise failed express trust—automatic resulting trust.
2. On the transfer of property in circumstances where the donor’s intent is unclear, or where the recipient provides no consideration—presumed resulting trust.

Automatic Resulting Trusts

An automatic resulting trust arises when an express trust fails, wholly or partially, so that the intended beneficial ownership is not disposed of. This occurs regardless of the parties’ intent.

Key Term: automatic resulting trust
A trust that arises by operation of law when an express trust fails to dispose of the whole beneficial interest.

Common examples:

• A trust with unclear or void beneficial interests—property returns to the settlor.
• A trust declared for a certain purpose which has failed or ended (for example, an unincorporated association that dissolves).

Worked Example 1.1

Scenario: A mother creates a trust of £50,000 for 'the children of the local school', but her instructions as to division are unclear and cannot be resolved by construction. What is the equitable result?

Answer:
There is an automatic resulting trust for the settlor (mother) over the undisposed beneficial interest. The trustees must hold the property for her rather than the intended class.

Presumed Resulting Trusts

A presumed resulting trust arises where A voluntarily transfers property to B or contributes purchase money for property in B's name, and there is no evidence A intended to make a gift. Equity presumes that A did not intend B to benefit absolutely.

Key Term: presumed resulting trust
A trust that arises where the transferor pays value or transfers property, there is no express trust, and no intention to make a gift is evidenced—so the property is presumed held for the transferor.

The presumption favours the transferor unless rebutted by evidence of gift or “advancement.”

Worked Example 1.2

Scenario: Omar pays £200,000 to buy a flat, but puts it solely in his nephew Samir’s name. There is no clear intention that this is a gift, nor is Samir a minor child or spouse of Omar. Who holds the beneficial interest?

Answer:
Equity presumes that Samir holds the flat on a resulting trust for Omar to the extent of Omar's contribution, unless evidence shows Omar intended a gift.

Presumption of Advancement

The presumption of advancement operates as an exception to the presumed resulting trust. In limited relationships, equity presumes that the transferor intended an outright gift.

Key Term: presumption of advancement
A rule that in certain close relationships (traditionally husband–wife, parent–child), a voluntary transfer is presumed to be a gift, not a resulting trust.

This presumption can be rebutted by contrary evidence.

Key Term: voluntary transfer
A transfer of property made for no consideration.

For other cases, the default is a presumed resulting trust unless gift intent is clear.

Rebutting the Presumption

Both resulting trust presumptions may be displaced by evidence of actual intention (whether of gift or retention of interest). Surrounding facts and conduct matter.

Worked Example 1.3

Scenario: Jade transfers £10,000 into her adult son's bank account. There is no explanation or memo. Her son claims it was a gift; Jade says she expected repayment.

Answer:
There is a presumption of advancement (mother to child), so the money is presumed a gift, but Jade can rebut this by evidence of her real intent. The court will examine factual evidence.

Exam Warning

Presumptions are starting points. Always check for evidence of actual intention—for example, emails or contemporaneous notes, or context such as loans, debts, or family arrangements.

Trusts of Surplus Property and Failure of Purpose

If an express trust does not exhaust the whole beneficial interest (for example, if surplus remains after a purpose ends or cannot be carried out), equity imposes an automatic resulting trust for the settlor or contributors.

Worked Example 1.4

Scenario: A group raises £100,000 for a school that is never built. There is no clause providing for alternative use. What should trustees do?

Answer:
The surplus is subject to an automatic resulting trust for the contributors. Each receives a share in proportion to their contribution.

Resulting Trusts and Co-Ownership/Purchases

Presumed resulting trusts often arise in “purchase money” situations, such as family homes, investment property, or business shares when the parties do not clarify beneficial ownership.

Revision Tip

Always ask: Who paid, who holds title, and what did the parties intend? Highlight these facts in client scenarios.

Practical Effects – Rights and Remedies

The person entitled under a resulting trust may claim a proportional or whole share, depending on value provided. Unless excluded by an express declaration of trust, they will have an equitable interest and may seek an order for sale or an account.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• The main types of resulting trust: automatic and presumed.
• Resulting trusts restore beneficial interest to the transferor when intent is unclear or a trust fails.
• Automatic resulting trusts arise when an express trust fails or is incomplete.
• Presumed resulting trusts arise on voluntary transfer or contribution without clear gift intention.
• Presumptions may be rebutted by evidence of the parties’ true intention.
• The presumption of advancement operates in specific close relationships.
• In purchase money or surplus trust situations, always analyse intent and factual contribution.

Key Terms and Concepts

• resulting trust
• automatic resulting trust
• presumed resulting trust
• presumption of advancement
• voluntary transfer