Often thought to no longer be relevant in modern law, the archaic concept of secret trusts still exist in Wills today. This little known but fascinating topic does appear from time to time. The law concerning secret trusts is complex, but in the most simple terms, a secret trust is created when a person (known as a testator) makes a gift in a Will to one person but really intends that the person receiving that gift (the secret trustee) to hold that gift for another person instead (the beneficiary).
How Is a Secret Trust Different From a Normal Will Trust?
In a normal Will trust, the terms of the trust, including who the trustees are, who the beneficiaries are, and the terms of the trust are set out in the Will.
For a secret trust, often the detail of the terms of the trust, including the names of the beneficiaries are not written down. To the outside world the secret trustee appears to be receiving the gift in their own right when, in fact, they are receiving it to hold on a secret trust for another person.
What Are the Two Types of Secret Trust?
Fully Secret Trusts are where the fact that there is a trust is not apparent at all from the wording of the Will. For example, a gift in a Will may say “I give £10,000 to X” but in fact the Testator has already agreed with X that they will give the £10,000 to Y.
Half Secret Trusts are where it can be seen in the Will that there is a trust, but the beneficiaries of the trust are not specified. Here the clause in the Will may say something like “I give £10,000 to X for them to act as trustee for the purpose I have communicated to them”.
What Are the Advantages of a Secret Trust?
The main reason for using secret trusts is to keep the identity of the intended beneficiary secret. Whenever a person passes away, once a Grant of Probate is issued, their Will becomes a public document. They were very popular in the Nineteenth Century for testators who did not want their family to know that they are making provision for an illegitimate child or mistresses. Using a secret trust meant the identity of the intended beneficiary was kept secret from their family and did not cause upset after their death.
What Are the Requirements for a Secret Trust?
There are three requirements for a secret trust to be created. These are:
- intention by the testator to create a secret trust;
- communication to the secret trustee that the gift is intended to be held on trust for a secret beneficiary; and
- acceptance of that role by the secret trustee
What Happens if a Secret Trust Is Found to Have Been Created?
If a secret trust is found to have been created, the secret trustee is deemed to hold the gift as trustee for the beneficiaries of the secret trust. This means that, whilst on the face of it, the secret trustee looks like they are inheriting the gift in their own right, they cannot keep this and must act in accordance with the secret trust and to use it for the benefit of the beneficiaries in whatever way was intended by the testator.
Summary
Due to the very nature of secret trusts, they can in practice be very difficult to prove. Often the only people who may know about any fully secret trust are the testator and the secret trustee. This could lead to disputes if the intended beneficiary does not receive their gift, however proving the secret trust in the absence of written evidence can be very difficult.
Choosing the identity of the secret trustee very carefully and ensuring that the three requirements for the creation of the trust are carried out is essential. No matter how important it may be for a testator to keep the identity of a beneficiary secret there remain real risks with using a secret trust and they may find that their wishes are ultimately not upheld.
If I have piqued your interest and you want to see a real life example of a case involving secret trusts, check out the case of Rawstron v Freud [2014] EWHC 2577 which involved the Will of the late Lucien Freud, renowned artist, and a dispute that arose after his death as to whether his Will did in fact contain a half secret or fully secret trust!
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About the Author
Liz Heads our busy Private Client Department. She is a qualified Trusts and Estates Practitioner having attained a Distinction in the STEP Diploma in Trusts and Estates Administration. She specialises in offering advice in relation to Wills, Probate, Trusts, Lasting Powers of Attorneys and Court of Protection Deputyship applications and is a member of Solicitors for the Elderly.
Liz is a member of the Association of Contentious Trust and Probate Specialists (ACTAPS). She deals with contentious probate cases, including challenges to the validity of Wills on the basis of fraud, irregularity, incapacity or undue influence, removal of Executors and Trustees and claims under the Inheritance ( Provisions for Family and Dependants) Act.
She recently represented the Claimant in the reported case of The British University in Dubai v Ebrahimi [2021] EWHC 757 (Ch) (26 March 2021), in which she successfully proved that a will, which had already been admitted to probate was a fraud ensuring that the estate was to be distributed in accordance with an earlier valid will.
Liz loves the variety that life as a Private Client lawyer brings. When she’s not working or studying, Liz loves to spend time with her husband and their young children which leaves little time for anything else!
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