Secret Trusts
Secret Trusts are often used to look after children born outside marriage. Or for a secret lover, or perhaps just someone your family disapproves of.
The principle is that the person leaves certain assets or sums to a particular person who appears to be the beneficiary. In fact, that person has promised to pass the inheritance on under the trust to a third party who has not been named in the Will. Consequently, the gift is kept quiet, even after the Will becomes available for public viewing after probate has been granted.
Here is a really good video by City College, if you would like to learn more To contact Allied Professional Will Writers call 01323 741200 or use the form here
For these Trusts to be valid, the person seeking to enforce the trust must prove that the testator intended to form a trust, that this intention was communicated to the trustee, and that the trustee accepted his office. There are two types of trust — fully secret and half-secret. A fully secret trust is one with no mention in the will whatsoever. In the case of a half-secret trust, the face of the will names the trustee as trustee, but does not give the trust’s terms, including the beneficiary. The most important difference lies in communication of the trust: the terms of a half-secret trust must be communicated to the trustee before the execution of the will, whereas in the case of a fully secret trust the terms may be communicated after the execution of the will, as long as this is before the testator’s death.
They do not comply with the formalities (such as witnessing) in the Wills Act 1837. Never the less, the courts have chosen to uphold them. Although various justifications have been given, they are either based on preventing fraud, or as regarding secret trusts as outside the operation of the Wills Act. The first is considered the traditional approach – if the courts do not recognise secret trusts, the trustee given the property in the will would be able to keep it for himself, committing fraud. The fraud theory utilises the equitable maxim that “equity will not allow a statute to be used as a cloak for fraud.”
A more modern view is that these trusts exist outside the will, and so do not have to comply with the Wills Act. Accepting this theory would undermine the operation of the Wills Act, since the Wills Act is designed to cover all testamentary dispositions. To avoid this problem, one approach has been to reclassify the secret trust as inter vivos (“between the living”) but this creates other problems. There have also been attempts to conclude that half-secret trusts rest on a different basis to fully secret trusts, although this has been disapproved by the House of Lords, primarily on practical grounds.
This debate is also of importance when classifying the trust as either constructive or express, a matter of considerable debate. On one view, if the traditional theory is correct, secret trusts are created by the courts, and are thus constructive; if the more modern view is correct, the trusts exist without the court’s permission, and are express trusts. However, a secret trust does not have to obey the separate formalities of the Law of Property Act 1925, even when it concerns land and one solution to this problem is to consider them constructive. Some commentators believe that half-secret trusts may fall into a different category to fully secret trusts in this regard.
To contact Allied Professional Will Writers, call 01323 741200 or use the form here.