UNIT 6

RESULTING TRUSTS

A resulting trust arises where property is transferred to someone who pays nothing for it, and it is implied by law that the property is to be held in trust for the person who provided the purchase money. It reflects the presumed intention of the parties and fills the gap when there is no explicit trust declaration. Resulting trusts are essential for ensuring that property returns to its rightful owner in the absence of an explicit trust, thereby preventing unjust enrichment. See the case of Savage v. Sarrough (1937) 13 NLR 141 which illustrated the principles of resulting trusts when property was transferred without consideration and the case of Ogunbambi v. Abowab (1951) 13 WACA 222 which further established the need for a resulting trust when the intended purpose of a trust is not fully declared.

TYPES OF RESULTING TRUSTS

1. Automatic resulting trusts: These occur when a trust fails or does not exhaust the trust property. For instance, if the purpose of a trust is not fully specified, the remaining property returns to the settlor.
2. Presumed resulting trusts: These arise when property is transferred without adequate consideration, such as in voluntary transfers or where one person provides the purchase money but the property is put in another's name.

CONSTRUCTIVE TRUSTS

A constructive trust is imposed by law to prevent unjust enrichment and arises regardless of the intention of the parties. It typically applies in situations involving fraud, breach of fiduciary duty, or wrongful retention of property. Constructive trusts ensure that individuals do not benefit from their wrongdoing and that property is equitably distributed. See the case of Abalogu v. SPDC (2003) 13 NWLR (Pt. 837) 309 which demonstrates the application of constructive trusts in cases of breach of fiduciary duty and the case of Ugo v. Obiekwe (1989) 1 NWLR (Pt. 99) 566 which highlights the use of constructive trusts in preventing unjust enrichment.

GROUNDS FOR CONSTRUCTIVE TRUSTS

1. Fraud and undue influence: this is when someone acquires property through fraudulent means or undue influence.
2. Breach of fiduciary duty: this is when a person in a fiduciary position gains an advantage from their position.
3. Unconscionability: this is when holding the property would be unconscionable or unjust.

DISCRETIONARY TRUSTS

A discretionary trust gives trustees the discretion to decide how to distribute trust income or capital among the beneficiaries. The beneficiaries have no absolute right to the trust property until the trustees exercise their discretion. Discretionary trusts offer flexibility in trust administration, allowing trustees to respond to beneficiaries' needs as they arise. See the case of Adebiyi v. Umar (2008) 3 NWLR (Pt. 1074) 88 which discussed the role of trustee discretion in managing trust property and section 2 of the Trustee Act 1962 which provides statutory backing for the creation and management of discretionary trusts.

KEY FEATURES OF DISCRETIONARY TRUSTS

1. Trustee discretion: this is where the trustees have the power to decide which beneficiaries receive what, and when.
2. No fixed entitlement: this is where beneficiaries do not have a fixed entitlement to the trust property.
3. Flexibility: the discretionary trust offers flexibility to adapt to changing circumstances of the beneficiaries.

PROTECTIVE TRUSTS

A protective trust is designed to provide for a beneficiary while protecting the trust property from being squandered or seized by creditors. It typically involves a life interest with a limitation to prevent creditors from accessing the trust property. Protective trusts are crucial for safeguarding beneficiaries' interests against potential financial imprudence or creditor claims. See the case of Etti v. Njokanma (1986) 2 NWLR (Pt. 22) 453 which demonstrated the protective elements of such trusts and section 25 of the Trustee Act 1962 which provides guidelines for the establishment and administration of protective trusts.

KEY FEATURES OF PROTECTIVE TRUSTS

1. Life interest: this is where the beneficiary has an interest for life, subject to certain conditions.
2. Forfeiture clause: this happens if the beneficiary attempts to alienate their interest or becomes bankrupt, their interest ceases, and the property reverts to other beneficiaries or purposes.
3. Protection from creditors: this is where protective trusts ensures that the trust property is not easily accessible by creditors.

TRUSTS IN FAVOR OF CREDITORS

Trusts in favor of creditors are established to pay off the debts of the settlor. The settlor transfers assets to trustees, who then manage these assets to satisfy the creditors. Trusts in favor of creditors ensure that debts are systematically settled, providing a structured approach to debt repayment and creditor satisfaction. See the case of Olaniyan v. Fatoki (2003) 14 NWLR (Pt. 839) 335 which discusses the establishment of trusts for the purpose of settling debts and section 10 of the Bankruptcy Act 1979 which provides a statutory basis for trusts established to pay off creditors in cases of insolvency.

KEY FEATURES OF TRUSTS IN FAVOR OF CREDITORS

1. Debt settlement: this is the primary purpose which is to settle the debts owed by the settlor.
2. Trustee management: this is where the trustees are responsible for managing the assets and paying the creditors.
3. Legal obligation: this is where the trust creates a legal obligation to prioritize creditor claims.

CONCLUSION

Understanding the various types of trusts, their purposes, and the legal principles governing them is essential for proper estate and financial planning. Each type of trust serves a specific need, whether it's protecting beneficiaries, preventing unjust enrichment, or ensuring the settlement of debts. The relevant Nigerian cases and statutes provide the legal framework necessary for the effective implementation and enforcement of these trusts.