A constructive trust according to Wikipedia is an equitable remedy resembling a trust (implied trust) imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding legal right to property which they should not possess due to unjust enrichment or interference.(That was a mouthful). More simply: Is a constructive trust a trust as this term is used in the common reporting standard ? Does the little attribute “constructive” make a big difference ?
The word constructive might mislead the unwary; the construction taking place here is that of lawyers who chip off blocks of the trust to make it fit a rather atypical set of circumstances. Many know this type of legal construction from employment law where a constructive dismissal is the interpretation that an employee who quits his job actually has been fired.How come to such a conclusion: the boss treated the employee badly so that the employee did not have a choice but leave.
That Wikipedia (which provided the introductory sentence) is not far off in regards to the interpretation of the law can be seen by recent decisions of US courts which define a constructive trust as “a relationship, with respect to property, subjecting the person who holds title to the property to an equitable duty to convey it to another on the ground that his or her acquisition or retention of the property would constitute unjust enrichment”. Other jurisdictions will treat fact patterns as those described by the Nebraska court by applying concepts of unjust enrichment. Even though multiple natural persons might be involved in such a transaction, with potentially fiduciary duties running among them, the label “constructive“ indicates semantic lawyerly wrangling that leave the original word and its meaning in the dust. The view that constructive trusts are not trusts is supported by legislatures as e.g. the California Probate Code , which specifically excludes constructive trusts from the definition of a trust (see section 82). (See also MATTER OF HSBC BANK USA, NA, 96 AD 3d 1655 — NY: Appellate Div., 4th Dept. 2012).
The little lawyerly construction seems to indicate that constructive trusts are not trusts for purposes of the common reporting standard. The alternative would be rather ridiculous, since any claim for unjust enrichment needed to be reported under CRS.
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