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The Hawkins Law Firm
256.571.2829

2303 Court Street PO Box 899
Guntersville, AL 35976

256.705.3593

600 Boulevard South SW Suite 104
Huntsville, AL 35802

256.586.4510

1209 Spring Valley Drive, NE
Arab, AL 35016

Estate Planning Newsletter

Constructive Trusts: Fraudulent Transfer of Property

A constructive trust is a remedy imposed by the court when a person has wrongfully attained property. The court basically takes the property away from the wrongful owner and puts it in trust for the rightful owner. In the estate planning/administration context, a constructive trust is usually imposed when there is wrongful conduct on the part of the trustee or beneficiary.

Types of Wrongful Conduct

Any wrongful activity that leads to the unfair acquisition of property may be cause for a constructive trust, including:

  • Fraud
  • Accident
  • Mistake
  • Undue influence
  • Violation of trust or fiduciary duty (for example, when a trustee purchases property in his own name rather than in the name of the beneficiary)
  • Homicide (for example, to obtain life insurance benefits)

Remedy Under Constructive Trusts

A constructive trust is imposed by a court as a result of a complaint by an affected party (typically a trustor or beneficiary of a trust). It may provide that the property pass from the wrongful owner to the rightful owner, or it may provide for the property to be held by a trustee for the rightful beneficiary.

However, if the unlawful owner has damaged or destroyed any of the trust property, the rightful owner is entitled to a money judgment for the value of the property.

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