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February 05, 2019

Constructive Trust – A Remedy for Getting Property to the Rightful Owner

Sometimes a parent titles an asset in one child’s name, with instructions that the asset is to be shared with all children after the parent’s death. After the parent dies, the child who holds the asset may choose not to share it with his or her siblings. In that situation, the probate court can help.
 
In In re Conservatorship and Guardianship of Dorothy Redd, Docket No. 341750, 2019 Westlaw 254520 (Mich. Ct. App. Jan. 17, 2019) (unpublished), there was an extensive family dispute over the management of Dorothy Redd’s affairs. One of the issues was ownership of Dorothy’s home. She had signed a deed naming her son Gary as joint tenant with full rights of survivorship; as a result, Gary would have become the sole owner of the property at Dorothy’s death. However, at a probate court hearing, Dorothy testified that she intended that Gary split the home among all of her children after her death. When Gary testified, it appeared that he did not intend to honor Dorothy’s wishes. The probate court set aside Dorothy’s deed to Gary, so that Dorothy again became the sole owner of her home. Gary appealed.
 
The Michigan Court of Appeals agreed that there were several legal grounds to set aside the deed, including the constructive trust doctrine. When it would be inequitable or unfair to permit the person who holds ownership of certain property to retain such ownership, then the probate court can impose a constructive trust, which says the property is being held in trust for the benefit of those persons who are entitled to receive it. In Redd, the appellate court ruled that the probate court properly applied the constructive trust doctrine to invalidate Dorothy’s deed, because it would have been inequitable and unfair for Gary to keep the property for himself.
 
What is to be learned from this case? The constructive trust doctrine doesn’t apply only to the type of fact pattern present in Redd. There could be many different circumstances where a person holds ownership of certain property – but it would be unfair to let that person keep ownership of the property. The constructive trust doctrine is a flexible remedy that can “unwind” property transactions when it would be fundamentally unfair not to do so.
 
If you need assistance with a probate court matter, please contact Warner attorneys David Skidmore (dskidmore@wnj.com) or Laura Morris (lmorris@wnj.com).
 

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