Constructive Trusts Can Catch Wayward Trust Assets

The California Court of Appeals, in a case styled Higgins v. Higgins, invoked the powers of a constructive trust to recover misappropriated assets. Maria Higgins, along with her husband, created the Higgins Family Trust in 1994. By 2007, Maria’s husband had passed and Maria, now 91, was suffering from cognitive decline. In 2009, as Maria continued worsen mentally, she added her step-son, Clive, as a joint account holder to her checking and savings accounts that were held by the trust. Clive was diagnosed with cancer in 2012 and became unable to attend to his stepmother’s finances. To remedy the deficiency, Clive named his wife, Lupe, as an account holder on a set of new created accounts.

After Clive’s death, Lupe placed the accounts in her name. When Maria died, Lupe distributed $10,000 to each of Maria’s eight grandchildren and treated the remaining funds as her own. Clive’s brother, Arthur, who was the successor trustee of the Higgins Family Trust, filed suit to recover the funds. At the trial court level, the judge held that Lupe had the right to do what she wished with the funds since Clive named her a joint account holder. The appellate court disagreed, held that Lupe’s repudiation of the trust was unjust, and ordered a constructive trust.

The Higgins case serves as a reminder to trustees to appropriately title trust accounts in order to make sure trust assets pass to the intended beneficiary.

See Jeffrey S. Gavin, Constructive Trusts Can Catch Wayward Trust Assets, Trust on Trial, May 15, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.