What is the Purchase Money Resulting Trust?

October 27, 2015 David Freedman Estate & Trust, Executors and Trustees, Joint Accounts, Trustees 0 Comments

Many of us that toil away in the world of estates become used to thinking of trusts doctrine within that very refined context. Obviously there are other contexts, and intersection between them and the world of estates. An example is the law of resulting trusts. We most often consider resulting trusts in terms of jointly held assets and the type of situation in Pecore v. Pecore, 2007 SCC 17 (S.C.C.). As we are all know, a gratuitous transfer calls for an explanation and where there is none forthcoming, an asset may presumptively be held on resulting trust for the transferor or her estate. Where a gift was intended, beneficial title may follow legal title and the transferee may retain the asset.

Another variation on this theme is where the transfer is not made gratuitously, but there was an intention for the transferor (e.g. parent) and transferee (e.g. child) to share title where there is the acquisition of an asset. We call this a ‘purchase money resulting trust’ – the transferor has an equity in the thing acquired which cannot be denied by the transferee. The leading case is Nishi v. Rascal Trucking Ltd., 2013 SCC 33 where Justice Rothstein explained the doctrine:

“A purchase money resulting trust arises when a person advances to funds to contribute to the price of property, but does not take legal title to that property. Where the person advancing the funds is unrelated to the person taking title, the law presumes that the parties intended for the person who advanced the funds to hold a beneficial interest in the property in proportion to that person’s contribution. This is called the presumption of resulting trust.”

A nice discussion of the relationship of these principles in the testamentary context can be found in a B.C. case, Frame v. Rai Estate, 2012 BCSC 1876, which was an Estate dispute involving rights in an asset that a number of family members bought together although title was held by only one person. The lesson for us is to follow the beneficial interest in property inter vivos, and consider whether there was a valid and complete disposition before death. It may be that the Estate has an equity in all, or part, of the property that remains after death.

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