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Constructive Trust

Trusts — irrevocable or revocable — are generally used in an estate planning context as a vehicle to transfer assets to heirs or as a tool to manage one’s finances more efficiently. In certain circumstances, a court may construct a trust in litigation to remedy a wrong committed by a defendant.

A constructive trust is a legal fiction imposed by a Court in which it interprets a defendant/wrongdoer as having  held property in trust for the benefit of the plaintiff. In order to obtain a constructive trust, the plaintiff must identify specific property to which he/she is entitled. Wier v. Kansas City, 204 S.W.2d 268 (Mo. 1947). The plaintiff may then seek to impose the constructive trust on — or to trace his property into — the proceeds which are in the hands of the wrongdoer. John R. Boyce Family Trust v. Snyder128 S.W.3d 630, 638 (Mo. Ct. App. 2004). Therefore, the plaintiff could recover any profit or increase in value that has accrued. To give an example, assume $1,000 of property is wrongfully taken. The wrongdoer then invests that money and turns it into $10,000 in 2 years. The plaintiff could under a constructive trust approach be entitled to the full $10,000. This must be proven — both the fact of the wrongful taking and any tracing — by clear, cogent and convincing evidence. Id.

Several issues can arise with the tracing so caution should be exercised. For instance, if the property reaches a bona fide purchaser, then a Court will usually not allow a constructive trust to continue beyond that point.

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