This specific type of trust arises by operation of law, not from explicit intention. It occurs when a transfer of property is made but the beneficial interest is not intended to vest in the recipient. For instance, if individual ‘A’ purchases a property in the name of individual ‘B,’ but provides the funds for the purchase, a court may infer that ‘A’ intended to retain the beneficial interest, resulting in a trust where ‘B’ holds the property for ‘A’s’ benefit.
Such trusts are an essential mechanism for rectifying unintended consequences arising from property transfers, thereby protecting the actual provider of funds or assets. This legal instrument has historical roots in equity and fairness, serving as a safeguard against unjust enrichment. Its significance lies in the ability to ensure that true ownership is recognized and enforced, even in the absence of a formal declaration of trust.