A Secret of Trust

Secret trust

Secret trusts fall within two general categories: The basic difference between a fully-secret and half-secret trust, is that there is no indication in the terms of the will that the trust exists in regards to a fully-secret trust.

While, in contrast, a half-secret trust may leave out the identity of the beneficiary, as well as the gift to be bestowed. To reiterate an important point in regards to a beneficiary making a claim for a secret trust, the person claiming the benefit, must demonstrate that the testator exhibited all the elements of creating a valid trust — namely: The creating of a secret trust can be complicated and for anyone who is considering creating a secret trust, should always seek the assistance of a lawyer. We want to make this site as good as it can for you, the user.

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It will be convenient to call the person on whom such a trust is imposed the 'primary donee', and the beneficiary under that trust the 'secondary donee'. The time to tell me was when it happened, not now. Brad Blanton recommends that couples share their complete sexual histories with each other. Two further problems are apparent when considering the fraud theory in the context of half-secret trusts. So while I'm aware of the danger of trusting other people, I don't obsess.

Home Learn about the Law Find a Lawyer. And are secret trusts valid? The elements of a secret trust First and foremost, a secret trust generally operates outside of the will, so the statutory protocols that govern testamentary dispositions are not applicable in certain circumstances.

What is a secret trust? And are secret trusts valid?

Furthermore, in order to prove the existence of a secret trust — because remember, the secret trust operates outside of the will — three additional elements should also be met: What is the difference between fully-secret and half-secret trusts? Law Firm Marketing Improve your visibility. For these 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 secret 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: Secret trusts do not comply with the formality requirements such as witnessing laid down in the Wills Act Despite this, the courts have chosen to uphold them as valid.

Although various justifications have been given for this, they are generally categorised as either based on preventing fraud, or as regarding secret trusts as outside dehors 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 secret trusts exist outside the will altogether, and thus do not have to comply with it. 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 , 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. A secret trust is an arrangement between a testator and a trustee to benefit a person without having to specify that person in a will. The courts recognise two forms of secret trust.

Fully secret trusts are trusts not referred to at all on the face of the will. Instead, an agreement made between the testator and trustees elsewhere. The trustee will instead be named only a beneficiary. This is where the dying person is encouraged not to make a will so that his property passes to the next-of-kin, on the agreement that the next-of-kin give effect to his wishes via a secret trust.

If this is the case, the next-of-kin would be obliged to hold the property on trust and fulfil the dying person's wishes.

Secret Trust Definition:

A secret trust must be contrasted with merely placing a moral obligation upon the beneficiary to deal with the legacy in particular way as in Re Snowden [5] and must impose a binding obligation, without discretion to act within its terms or not. The secret trust has proved difficult to reconcile these trusts with Section 9 of the Wills Act , [2] which provides that a will is only valid when:. As such, such trusts are not enforceable because they are invalid. Equity has been willing to accept their validity in the common law to prevent the trustee committing fraud and keeping the property; [1] justifications for this acceptance are debated.

In practical terms, there are several reasons why admitting the language of fraud to justify a fully secret trust, but not a half-secret trust, would be sub-optimal. This is considered one principal reason why the court in Blackwell v Blackwell [9] established that both types of secret trust shared a single justification. A half-secret trust appears closer to fulfilling the formality requirements as laid down in the Wills Act, so the conclusion that it is less likely to be enforced seems contradictory.

Also, such a rule would encourage fully secret trusts, with a wider possibility for fraud.

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It would also spark considerable litigation on whether a particular clause resulted in a fully secret or half-secret trust. Thus it may be argued that despite the difficulties, a half-secret trust should be enforced if fully secret trusts are. The secret trust was originally conceived to prevent fraud enabled by statute or the common law, in line with the equitable maxim that "equity will not allow a statute to be used as a cloak for fraud".

In this way, a court of equity has dealt with the Statute of Frauds, and in this manner, also, it deals with the Statute of Wills. There have been two grounds on which this rule has been based. The narrower ground is that the trustee should be debarred from denying the existence of the trust because of his wrongful conduct at the time he made the undertaking, as identified by Lord Westbury in McCormick v Grogan. The wider ground appears to have been adopted by the Court of Appeal in Bannister v Bannister.

Hodge has argued that "acceptance of the narrower view would not only impose upon a person seeking to establish a secret trust the heavy onus of showing at what point of time the secret trustee decided to resile from his promise, but would also make the validity of the secret trust dependent upon what is in fact an irrelevant consideration". Since allowing the trustee of the will to retain the property is at the heart of the "fraud", it is not clear why courts have considered the appropriate remedy to recognise a trust on behalf of others, rather than a resulting trust in favour of the estate the residuary legatee.

Save in case of a will and except the plain reading of clauses within the will, having admitted external evidence as operating under the proper introduction of the doctrine of incorporation by reference, a conclusive claim that it is necessary to observe further the formality requirement cannot be disregarded, because Will Act clearly set out the requirements of property transfer in case of failure has to be based on result trust that a party ultimately intended. In light of evidential burden of proof, when establishing the identity of the secret beneficiary,.

Two further problems are apparent when considering the fraud theory in the context of half-secret trusts.

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Since the will mentions the trust, it is impossible for the trustee to deny the existence of the trust. It appears to create an alternative route: Under the rule of three uncertainties in private trust, half or fully secretly trust ought to fail because of lack of intentional element. Those in favour of its enforcement must therefore observe the imposition of resulting trust as required under three certainties rule, and the "fraud" theory seems insufficient to do so, since there is no sublet and significant impact for dishonest act and if otherwise fraud can be upheld; and therefore no conduct on the part of the trustee to warrant it.

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The deceased's intended disposition remains imperfectly constituted and the intended beneficiary's claim is thus weaker than the residuary legatee's. Whilst one response has been to suggest that whether a resulting trust or enforcement of the secret trust is most appropriate remedy is a question for the courts, subsequent cases have typically defined the automatic resulting trust, as in this case, as operating as a matter of law and not a question for the courts, and this should be settled by parliament legislation. Alastair Hudson has also argued that the fraud argument is significantly flawed.

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The theory suggests that liability for the property comes about from fraud; in fact, liability comes about as soon as the trustee accepts the property to hold on trust, and so the fraud theory is not necessary to bind the trustee's hands. Based on the fraud theory, secret trusts are sometimes classified as constructive trusts; the reason they do not have to follow the Wills Act is because they are created by the courts. A more modern argument is that secret trusts are independent and operate outside the will. This suggests that secret trusts are not constructive trusts but rather express trusts.

It has been suggested that the dehors theory is based on detective drafting of the Wills Act. In particular, whilst the term "will" is commonly used to refer to a specific document, the WIlls Act is designed to cover almost all documents except rules on public trust and secret trust that are to take effect after the testator's death.

Secret Trust Law and Legal Definition | USLegal, Inc.

Indeed, the formality requirements of the Wills Act created the need for a set of prima facie documents, like the one commonly referred to. Therefore, to refer to an arrangement as dehor the Wills Act because it is not a prima facie reference to the document is incorrect. Although the testator is unlikely to consider the trust having come into existence at the time of the will upon his death, whether a disposition is arguably though less convincingly regarded as an inter vivos is a question for the courts as well as parliament.

No separate declaration of trust is required in the case of property acquired after the execution of a will for it to form part of a secret trust.