Resulting Trusts: When Title Does Not Tell the Whole Story

Trusts

To understand what a resulting trust is, it is necessary to first understand what a trust is. Some people might not know that there are two forms of property ownership: legal ownership and beneficial ownership. It is because of these dual forms of property ownership that trusts can exist.  

When a person holds legal ownership of a property, it is their name that appears on formal title or registered documents. They are the person who has authority to deal with the property, though there are often limits on that authority if they are not also the beneficial owner. A beneficial owner, on the other hand, has the right to enjoy the property’s value and benefits even if their name is not on title (i.e. someone else is the legal owner). Because the beneficial owner is entitled to the property’s value and benefits, they are often described as the “true” owner.

Generally, the legal and beneficial owner will be the same person. Under British Columbia’s land title system, the registered (or legal) owner of a property is presumed to be the beneficial owner as well (Land Title Act, R.S.B.C. 1996, c. 250, s. 23). That presumption is referred to as the “presumption of indefeasible title” and is the starting point in any dispute over beneficial ownership of property.

Sometimes, however, the legal and beneficial owner of property are different people. In those scenarios, the legal owner holds the property in “trust” for the beneficial owner. There are several ways in which this trust relationship is established. One such way is a resulting trust.

The Resulting Trust

The resulting trust is a manifestation of the maxim, “equity presumes bargains, not gifts.” It is a legal presumption that allocates the burden of proof in disputes over beneficial ownership of property when that property was transferred gratuitously, meaning for nothing in return.

If a person receives property but provides no consideration or value for it, the law presumes that person holds the property in a resulting trust for the transferor. In effect, the presumption of resulting trust displaces the presumption of indefeasible title and shifts the burden of proof to the transferee to establish that the transfer was a gift. If the transferee cannot establish that the transfer was a gift, the resulting trust is established and the transferee must return the property to the transferor.

This article is for general information only and is not legal advice.

Article by: Doug Conolly and Robert Goddard