Core principles of trust law - Resulting trusts

Learning Outcomes

This article sets out the operation and practical application of resulting trusts, including:

• The distinction between automatic resulting trusts and presumed resulting trusts and when each arises
• Purchase-money resulting trusts and quantifying proportional shares by contemporaneous contributions
• Presumptions of advancement, evidential burdens, and how contemporaneous evidence can rebut or support presumptions
• Typical fact patterns involving failed trusts, surplus funds, co-ownership disputes, voluntary transfers, and half-secret trust failures
• The effect of s 60(3) Law of Property Act 1925 on voluntary land transfers and inference of resulting trusts from surrounding facts
• Formalities for implied trusts and the application of s 53(2) LPA 1925
• Illegality and recovery of funds under the modern policy-oriented approach
• Practical remedies for beneficiaries under resulting trusts, including declarations, TLATA orders, and tracing, and advising on the practical consequences

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, with a focus on the following syllabus points:

• 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 (voluntary transfers, purchase money, and failed trusts).
• Applying presumptions of advancement and rebutting resulting trusts with admissible contemporaneous evidence.
• Recognising the effect of s 60(3) LPA 1925 on voluntary transfers of land and how a resulting trust can still be inferred on the facts.
• Understanding that implied trusts, including resulting trusts, do not require writing (s 53(2) LPA 1925).
• Advising clients on the practical impact of a resulting trust, including quantifying proportional shares and available remedies.
• Recognising and explaining resulting trust principles in co-ownership, voluntary transfer, surplus funds, half-secret trust failure, and failed non-charitable purpose trust 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. Equity imposes resulting trusts to avoid an “equitable vacuum”—ensuring someone holds the beneficial interest where no valid disposition has been made—and to prevent unintended enrichment.

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. In many resulting trust scenarios the trustee’s duty is largely custodial: to hold and convey the equitable interest back to the person entitled. Nonetheless, basic fiduciary duties and duties of care apply until the beneficial interest is transferred.

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.

They can arise over any property type (land or personalty) and may allocate either the entire equitable interest or a proportionate share depending on contributions.

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. Examples include:

• Failure of a contingent interest (e.g., “to A’s child who reaches 25” where the child dies at 24).
• Failure for uncertainty (e.g., uncertain objects or uncertain shares).
• Failure for perpetuity (e.g., non-charitable purpose trusts that lock capital indefinitely).
• Failure of half-secret trusts due to non-communication of terms.
• Surplus remaining after fulfilling a purpose where no alternative disposition is provided.

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.

When equity imposes an automatic resulting trust, the trustees hold the property for the settlor or, if the settlor has died, for the settlor’s estate (usually passing under the residuary clause).

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, or a non-charitable purpose trust that offends the rule against inalienability).

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.

Additional illustration: if a will leaves £5,000 “to my trustees to hold on the trusts I have communicated” (a half-secret trust) but no communication is made, the attempted trust fails and the trustees hold the sum on resulting trust for the residuary estate.

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. The presumption is a starting point, allocating the evidential burden: it can be displaced by evidence of actual intention or by the presumption of advancement (where applicable).

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.

Key purchase-money rules:

• The contribution must be contemporaneous with acquisition and directed to the purchase price (not post-acquisition reimbursements or improvements).
• If multiple people contribute to the price, equity presumes proportional beneficial shares to match their contributions.
• Contributions to legal fees or taxes (not the purchase price) do not give rise to a purchase-money resulting trust.

Note on land: s 60(3) LPA 1925 states that in a voluntary conveyance of land a resulting trust is not implied merely because the conveyance does not declare a use or benefit for the grantee. This does not abolish resulting trusts in relation to land; rather, it limits automatic implication solely from the form of the conveyance. Courts may still infer a resulting trust from surrounding facts (e.g., the parties’ relationship, payment patterns, or retention of control).

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.

Where Omar contributed 100% of the purchase price, the presumption is that he has a 100% equitable interest; if he paid part, he is presumed to hold a proportionate equitable share matching that contribution.

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 and father–child, or in loco parentis), a voluntary transfer is presumed to be a gift, not a resulting trust.

Classically, this presumption applies:

• Father to child (minor or adult), or a person standing in loco parentis.
• Husband to wife.
• Historically, fiancé to fiancée where marriage follows.

In modern practice, courts treat the presumption as weak and readily rebuttable. There is no general presumption of advancement from mother to child (although it is often easier to prove a gift on the facts), and no presumption in the reverse direction (child to parent). Section 199 of the Equality Act 2010, which would abolish the presumption of advancement, is not yet in force.

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

This presumption can be rebutted by contrary evidence demonstrating that a gift was not intended.

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. Admissibility rules are important:

• Evidence of the transferor’s acts or declarations before or at the time of transfer (or so immediately after as to form part of the same transaction) is admissible for or against the transferor.
• Subsequent acts or declarations are admissible only against the transferor; the transferor cannot rely on later statements to manufacture proof that a gift was not intended.

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–child is not strictly a classical category, but in practice the court will assess the evidence closely). Jade can rebut any gift presumption by contemporaneous evidence of her real intent. The court will examine all admissible factual evidence. If Jade’s evidence consists only of statements made well after the transfer, they will not assist her; contemporaneous context (e.g., a loan note, emails at the time) would.

Worked Example 1.4

Scenario: A father put the legal title to a house in his adult daughter’s name, kept the title deeds, and told family at the time that the son-in-law would “repay me.” Years later, he signed a note saying the house should go equally to all his children.

Answer:
The initial presumption of advancement (father to child) is rebutted by contemporaneous indications that he did not intend a gift (retaining deeds, statements about repayment). The later note cannot be used to support his case, as post-transfer declarations are admissible only against the maker. A resulting trust is likely to arise in the father’s favour to the extent the presumption is rebutted.

Worked Example 1.5

Scenario: X transfers £200,000 to Y for a scheme intended to use insider information to profit from share price movements. The scheme is never carried out. X seeks return of the money; Y argues illegality prevents recovery.

Answer:
Applying the modern approach, the court weighs policy factors (including the purpose of the prohibition, proportionality, and the parties’ culpability). Restoring the money to X does not further any illegality but simply unwinds the abortive scheme. A restitutionary recovery is permitted; a resulting trust analysis can support X’s claim to the funds where no gift was intended.

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. For admissibility, prefer pre-transfer or contemporaneous evidence; later statements aid only the opponent.

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. Distinguish between (a) genuine purpose trusts with identifiable beneficiaries (which may be construed as outright gifts with explanations of motive), and (b) funds raised for a specific object without a gift over.

Worked Example 1.6

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.

Worked Example 1.7

Scenario: A testator leaves money “for my widow’s maintenance and for the training of my daughter to university grade, and for my aged mother.” The mother predeceases the testator; the daughter completes her education; the widow dies with funds left.

Answer:
The court may construe this as an outright gift (with statements of motive) rather than a pure purpose trust. If so, there is no resulting trust of the surplus; the donee takes absolutely and any unused amount remains hers. Where the wording clearly creates a purpose trust with no identifiable beneficiary and no gift over, surplus funds result.

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. For land bought in joint names for domestic occupation, modern authorities emphasise that the beneficial interest will generally follow the legal title unless rebutted by evidence of a different common intention; constructive trust principles may therefore displace purchase-money resulting trust analysis in the domestic context. However, where property is acquired as an investment or in non-domestic circumstances, purchase-money resulting trust principles remain central to quantifying shares by direct contribution.

• For purchase-money resulting trusts, quantify shares by contributions to the price at the time of purchase.
• Mortgage repayments and improvements after acquisition do not generally alter resulting trust shares (though they may support constructive trust or equitable accounting in appropriate cases).

Revision Tip

Always ask: Who paid, who holds title, and what did the parties intend? Highlight these facts in client scenarios. Distinguish domestic family home cases (often constructive trust) from investment purchases (often resulting trust).

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:

• A declaration of their beneficial interest and consequential orders.
• Transfer of the legal title or appropriate conveyance of their share (applying Saunders v Vautier where absolutely entitled).
• For land, remedies under TLATA 1996 (such as an order for sale or regulation of occupation) to realise their share.
• An account of profits in appropriate cases.
• Proprietary remedies such as tracing if the property or proceeds are misapplied.

Formalities: no writing is required to create or evidence resulting trusts (s 53(2) LPA 1925). For land, although declarations of express trust require writing (s 53(1)(b)), implied trusts—including resulting trusts—arise without formal documentation. In voluntary land transfers, consider s 60(3) LPA 1925; no resulting trust is implied “merely” from the absence of a declared use, but the court may infer one from the facts.

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 (including failures of contingencies, uncertainty, perpetuity, or half-secret trust communication).
• Presumed resulting trusts arise on voluntary transfer or contribution without clear gift intention; quantify shares by contemporaneous contributions to the purchase price.
• Presumptions may be rebutted by evidence of the parties’ true intention (preferably contemporaneous). Subsequent declarations assist only the opponent.
• The presumption of advancement operates in specific close relationships (traditionally father–child, husband–wife, and in loco parentis) but is weak and rebuttable; s 199 Equality Act 2010 is not in force.
• For land, s 60(3) LPA 1925 limits automatic implication of a resulting trust from the form of conveyance alone, but a resulting trust can still be inferred on the facts.
• Implied trusts, including resulting trusts, require no writing (s 53(2) LPA 1925).
• In purchase money or surplus trust situations, always analyse intent and factual contribution and advise on practical remedies (declaration, sale, account, tracing).

Key Terms and Concepts

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