I. Express Trusts – (Written Instrument Required)

Express trusts, as they are known in English law, are trusts that are deliberately established by a settlor, as opposed to having been created either through a statute or a court order. They are usually created by instruments expressly indicating the persons, property, and purposes of the trust so that their duration and nature are certain.  An express trust is said to come into being only upon execution of an intention to create it by the party having the legal and equitable control of the subject matter of the trust. See 54 Am.Jur., Trusts, Section 5.

Express trusts are generally created by instruments that point out directly and expressly the property, persons, and purpose of the trust; hence, they are called direct or express trusts in contradistinction from those trusts that are implied, presumed, or construed by law to arise out of the transactions of the parties. Perry on Trusts, vol. 1, sec 24.

II. Implied Trusts – (Arise from the Circumstances, no Written Instrument Required)

Implied trusts are equitable remedies which arise entirely by implication of law and are either constructive or resulting trusts.  These trusts are used by the courts as a remedial device to restore the status quo. The burden of proving the existence of an implied trust rests on the party seeking to enforce it. Implied trusts are of two species — resulting and constructive. 

• Resulting Trust – No Writing Required, Absence of Fraud

A resulting trust arises where the legal estate in property is disposed of, conveyed, or transferred, but the intent appears, or is inferred from the terms of the disposition, or from the accompanying facts and circumstances, that the beneficial interest is not to go with the legal title, or to be enjoyed by the holder thereof. 

A resulting trust is one of the classes of trusts, which arise by operation of law and may exist where an express trust could not exist, since it may arise without being created in writing, being based upon presumption or inference of law and not upon expression of the trustor’s intention. See 54 Am.Jur. Trusts, § 186 et seq.

A resulting trust arises from the nature or circumstances of consideration involved in a transaction whereby one person thereby becomes invested with a legal title but is obligated in equity to hold his legal title for the benefit of another, the intention of the former to hold in trust for the latter being implied or presumed as a matter of law, although no intention to create or hold in trust has been manifested, expressly or by inference, and although there is an absence of fraud or constructive fraud. 54 Am.Jur., Trusts, § 196.

A resulting trust may arise by operation of law and exists where intent either appears or is inferred from accompanying circumstances that beneficial interest is not to be enjoyed with legal title. 

• Constructive Trust – Fraud Required (Equitable Remedy)

The proper basis for impressing a constructive trust is to prevent unjust enrichment. Restatement of Restitution § 160, Comment c [1937]. It is created by Court Order.

A constructive trust is such as is raised by equity in respect of property which has been acquired by fraud, or where, though acquired without fraud, it is against equity that it should be retained by him who holds it. 

If a person obtains the legal title to property by such arts or acts or circumstances that he ought not, according to the rules of equity and good conscience as administered in chancery, to hold and enjoy the beneficial interest of the property, courts of equity, in order to administer complete justice between the parties, will raise a trust by construction out of such circumstances or relations”.¶15 In Perry on Trusts.

The primary reason for imposing a constructive trust is to avoid unjust enrichment. It is imposed against one who “by fraud, actual or constructive, by devices or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy.” There must also be some active wrongdoing on the part of the person against whom recovery is sought (Grantee). 

A constructive trust is an equitable remedy imposed by the Court, and therefore, common law specific fiduciary duties may not be applicable.

III. Statutory Trusts

Statutory trusts arise when mandated by a statute requiring that under certain circumstances the property shall be held in trust. If the statutory trust does not define the fiduciary duties of the trustee, common law fiduciary duties likely apply. Such duties and liabilities of statutory trust may be expanded, restricted or eliminated by the trust’s governing instrument.  

A. COMMON LAW FIDUCIARY DUTIES ASSOCIATED WITH IMPLIED TRUSTS, STATUTORY TRUSTS, EXPRESS TRUSTS.

Fiduciary duties may be implied in law, regardless of whether contractual relations or formal writings exist or a statute imposes such a duty, when one party relies on another to act on the party’s behalf and to look out for its best interests.  After a trustee accepts a trust, it is standard custom and practice to carefully examine the terms of the trust in order to form a plan of administration that is consistent with the trustee’s duties of loyalty and prudence to the beneficiaries. 

• Duty of Loyalty. Standard customs and practices of a trustee require that it act solely in the best interest of the beneficiaries. The duty of loyalty is embedded in the trust relationship itself and is considered the bedrock of the trust relationship. Loring and Rounds: A Trustee’s Handbook §6.1.3 quoting Restatement (Third) of Trusts § 78 cmt. c(2).  This fundamental tenet requires that the Trustee refrain from acting in such a way that could conflict with the interests of the beneficiaries. Consistent with its duty of loyalty, a trustee is obligated to implement a strategy that protects and maximizes the beneficiaries’ interests. The trustee is also required to avoid acting in its self-interest, and to conduct itself with the highest degree of fidelity.

• Duty of Prudence – The customs and practices of a corporate trustee require that it act with a duty of prudence to administer and manage the Trust with care, skill, and caution considering the purpose, terms, and distributional requirements of the Trust. If a delegation of duty is deemed necessary by the trustee, the trustee has a duty to prudently select, instruct, and monitor the delegated agent. Prudence also dictates that the trustee assign the most qualified, experienced personnel to administer the trust. Periodic reviews of the trust holdings are prudent to verify that the trustee’s actions conform to the purpose and terms of the governing instrument. If there were to arise a situation where a limitation on the trustee’s authority could materially affect or cause harm to the beneficiaries’ interests, the trustee is obligated to inform all interested parties, and should thereafter petition the Court for instruction, direction, and clarification.

• Duty of Disclosure – The customs and practices of a corporate fiduciary require that it inform and account. The scope of that duty is defined by the terms of the governing instrument and applicable law. Such duty is fundamental to the trust relationship; a trustee must keep the beneficiaries reasonably informed of their interests in the trust, any significant developments during the course of administration, and any changes to the governing instruments that could affect their interests. The trustee must maintain clear, complete, and accurate books and records with respect to trust property. If such recordkeeping duty is delegated, the trustee has a duty to prudently select, instruct, and monitor the delegated agent. Certain circumstances may require the trustee to take affirmative steps to provide additional information. A corporate fiduciary is obligated to disclose its fees and compensation, and to ensure that interested parties understand the mechanics of how the fees and compensation are calculated/charged and in what intervals. 

• Good Faith & Candor – The customs and practices of a corporate fiduciary require that it act with good faith and administer the Trust in accordance with both the terms of the trust and the interests of the beneficiaries. In effectuating this duty, a trustee must use reasonable care, skill, and caution, and utilize its facilities and skill in a transparent, truthful manner taking into consideration the goals and interests of the beneficiaries. If the trustee is not equipped or qualified to handle the trust, it has a duty to conduct due diligence and recommend independent, impartial alternatives. In the case where the trustee does not possess the requisite personnel, platforms, or resources to administer the trust in compliance with its fiduciary duties, it has a duty to inform interested parties of this fact, or, at the very least, implement processes to address these shortcomings.

• Recordkeeping –  The Restatement (Third) of Trusts provides that “A trustee who fails to keep proper records is liable for any loss or expense resulting from that failure.  A trustee’s failure to maintain necessary books and records may also cause a court…to resolve doubts against the trustee.” Restatement (Third) of Trusts, §83 cmt. a(1).