The remedy imposes a trust on property acquired through fraud, breach of fiduciary duty, or unjust enrichment. It permits tracing into substituted assets and gives priority over general creditors.
Identifiable property is required.
Alternative Names:
Constructive Trust Remedy|Equitable Trust
Why it Matters?
Priority over general creditors is what makes the remedy valuable in insolvency, since a constructive trust beneficiary recovers specific property rather than sharing pro rata in a bankruptcy distribution. Tracing into substituted assets extends that advantage where funds were converted into other property. Identifiability is the limitation, since commingled funds dissipated without traceable proceeds cannot support the trust.
Frequently Confused with
Related terms
Frequently asked questions
Why is the remedy valuable in insolvency?
What is the limitation?
