What Is A Constructive Trust?

A trust is a type of legal structure that is used to transfer assets from one person to another. Unlike wills, trusts are not subject to the probate process, making it simpler to pass on wealth. A constructive trust, however, is quite different from a standard trust.

What Are The Basics Of A Constructive Trust?

Most trusts are used to pass money, property, and other assets to loved ones or charitable organizations. A constructive trust, in contrast, is only used to pass assets along when one person has come by them dishonestly.

Constructive trusts are court-mandated and are most often used in fraud cases or civil disputes over property. When a constructive trust is set up, it means that the rightful owner is acknowledged, and the person holding the property is obligated to care for the assets until they are fully returned to the owner. When the original asset has been sold or transferred, the court might order that the value of the asset be paid to the original owner.

Unlike standard revocable or irrevocable trusts, a constructive trust isn’t set up by individuals. It’s set up by the court to provide resolution and restore assets to their rightful owner. There is also no trustee appointed, which is the person who would normally be tasked with overseeing a trust.

When Is A Constructive Trust Needed?

Most people will never need a constructive trust. They are only set up when a person has been wrongfully enriched and should transfer specific assets to another individual. Usually, these trusts are set up to protect property until it can be transferred back to the true owner. A constructive trust can also be used when the original assets have been converted into another asset that would be difficult or impossible to return to the rightful owner.

Constructive trusts might be used when someone has been found guilty of fraud or embezzlement. They can also apply when someone was coerced or influenced to transfer the property. Proving that there is a case for a constructive trust is often difficult, but it can be an effective tool for retrieving property and assets that should still belong to their former owner.

Are All Constructive Trusts The Same?

Each situation requiring a constructive trust is slightly different. The court will consider all factors in the case before deciding how the trust will be set up.

It’s important for anyone involved in a legal dispute to have a trusted attorney they can turn to for help and advice. If you think your situation might involve a constructive trust, contact our Worcester, MA, estate planning attorney at (774) 366-3711 for more information and guidance.