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Constructive Trust

Last updated 25th Nov 2022


The term constructive trust refers to a court-imposed, implied trust that benefits a party that has been harmed in some way or wrongfully deprived of assets. Constructive trusts are not actual trusts; they are legal remedies used to correct the unjust enrichment of one party.


One of the ways a court of law can correct unjust enrichment is through a constructive trust. Unlike a true trust, a constructive trust is not freely established by a settlor / donor. Instead, the "donor" of a constructive trust is typically a party that has unlawfully realized a gain in assets. This can happen when a party holds the rights to a property they should not own, or has realized a monetary gain through nefarious means.

Imposed by a court to benefit the harmed party, a constructive trust typically does not include a trustee. Instead, the unjustly enriched party would be ordered to transfer the assets to a party that has been wrongfully deprived of the assets. Through this mechanism, the deprived party becomes the beneficiary of the constructive trust.

There are a large number of harms that could result in a constructive trust, including: breach of fiduciary duty, payment of compensatory or punitive damages, equitable remedies, payment of legal costs, cases of fraud, and the return of life insurance proceeds obtained through illegal means.

Related Terms

Clifford trust, charitable remainder unitrust, business trust, bank account trust

Moneyzine Editor

Moneyzine Editor