What is a Constructive Trust?
Trusts and other ‘equitable remedies’ are often misunderstood and are considered to be a complex area of the law. That said, there is a clear need for constructive trusts. A constructive trust is not a true ‘trust’ in the literal sense, which is where there are trustees who manage the trust on behalf of beneficiaries.
One Person Must Unjustly Benefit From Another Person's Act
A constructive trust is a passive, temporary type of arrangement after which the trustee has to pass the property over to the beneficiary. If a person has been wrongfully deprived of their rights by someone who has obtained a legal right to property which they should not have, this can amount to a constructive trust.In essence, if a person has acted to their detriment so that someone else unjustly benefits from that action, this may be a situation in which a constructive trust has been created.Example of a Constructive Trust
The best way to explain this concept is by way of example. An unmarried couple, Rachel, lived in a house together for many years. The property was in Rachel’s sole name, as her partner Steve moved in with her. She was a dedicated career woman and despite having two children did not take more than a couple of weeks off after having each of the couple’s two children. Steve was a part-time photographer and as such had a low income, but was content to be the main carer of the children and used all his money for the benefit of the family.The End of the Relationship
Each day, Steve did the school runs, ran and cleaned the household, went to all the children’s school events, cooked all the meals and generally supported his partner while her career went from strength to strength. One day, after Christmas, Rachel told him she was having an affair and wanted him to move out. Steve was heartbroken but moved out and went to go and see his solicitor immediately. He was advised to move back into the property, as he had equitable rights in the property, that Rachel held on trust for him.What Steve Did
Things would get very complicated if Rachel then were to move her new boyfriend in, so although he didn’t feel comfortable moving back in, he did to preserve his rights and in order to continue to look after the children. Steve managed to get a job and began to earn a good salary. Eventually Rachel got so annoyed with having to share the home with him that she moved in with her new partner, and Steve bought her share of the home. All of the years that Steve had spent with Rachel, contributing to the family income and bringing up the children had created a constructive trust. While Steve’s name was not on the title deeds, he did have a claim to a proportion of the family home.If the Case Had Gone to Court
Of course, if Rachel had refused to move out it may have been necessary for Steve to have taken the issue to court. Steve’s lawyer would have asked the court to recognise the existence of a constructive trust and order that Rachel paid him money to compensate him for his share of the ownership that he had in the family home.Interested in Branding, a Website or Graphic Design?
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John - 11-Jan-16 @ 9:02 PM