Ownership of Assets – Trust or Advancement

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To a large extent, a trust is created expressly either through a will or through a separate document where a settlor transfers property in trust for the benefit of someone else. There are, however, other instances where a trust, though not expressed, may be implied by the courts. This type of trust is referred to as a resulting trust and occurs where property is put into the name of someone who has paid nothing for it. This often occurs in joint ownership of assets where persons, mostly parents, add the name of a child to their property or to their bank account.

Generally, if a person’s name is added to title of assets that person is presumed to be a beneficial owner. However, where the added individual has paid nothing for the asset there may be a presumption that the property is being held in trust for the beneficial owner even where there is no expressed declaration of trust. This can happen in a number of situations. In the case of Borkenhagen v. Kessler Mr. and Mrs. Berkenhagen made an offer to purchase a property as an investment with the intention of renting it to the defendant Ms. Kessler. Before completing the transaction they became aware that only owners of the apartment were allowed to live in the apartment. They, therefore, needed to add Ms. Kessler’s name to the title as a joint tenant in order to acquire the property.  Ms. Kessler later claimed to be entitled to one-third of the property by virtue of the fact that her name appeared on the title. The court found that there was never an intention that Ms. Kessler would become the owner of the property and that she merely held one-third of the property in trust for Mr. and Mrs. Berkenhagen.

To determine whether or not a trust exists the court looks at the intention of the person who makes the transfer. As such, whenever a transfer of asset is made to an independent adult who provides no value for the transfer there will be a presumption of resulting trust unless a contrary intention is shown.

In Pecore v Pecore an elderly parent added his daughter’s name to his bank account as a joint owner. In his will, he left the residue of his estate to his daughter and her ex-husband. The court had to determine whether the money in the bank account was being held by the daughter in trust for the deceased and subsequently passed to his estate, or whether it was an advancement (gift) whereby the intention was to allow her to become the sole owner after his death. The court stated that in cases where assets are transferred gratuitously to an adult independent child in joint ownership there will be a presumption of resulting trust which means that the money should go to the estate after the death of the beneficial owner.  Despite this presumption, if it can be shown that the testator’s intention was to make a gift to the child, then it will be deemed to be a gift or advancement.

The presumption of resulting trust does not apply to minor children. Consequently, when assets are transferred into the names of minor children the courts will presume that a gift was made to such children.  It should be noted that the main factor that gives rise to the presumption of resulting trust is that no value was given for the transfer.


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