Types of secret trusts
English law recognises two categories of secret trust, namely ‘fully secret trusts’ and ‘half-secret trusts.’ The central difference between these categories is the extent to which the testator’s will discloses that the person named as the recipient of a bequest is intended to take the property as a trustee rather than for himself. Whilst the difference might appear slight, for a long period of time it was held that only fully secret trusts should be recognised as valid, and even though half-secret trusts are now accepted, the rules governing their creation are somewhat more restrictive.
A fully-secret trust is created when a testator bequeaths property to a specified person in his will who has agreed that he will hold the property left to him on trust for a third party. In a fully-secret trust neither the fact of the trust nor the identity of the beneficiary are revealed in the will.
The performance of a fully secret trust is to some extent dependent on the integrity of the beneficiary who has agreed to act as the secret trustee. There is always a danger that the secret trustee will ignore the trust and take the property left to him by will for his own benefit and refuse to apply it to the intended secret beneficiary. This danger will be avoided if the testator indicates in his will that the recipient of the bequest is not intended to take the property absolutely, but as a trustee. By this means the identity of the ultimate beneficiary remains concealed, but the beneficiary named in the will is clearly seen to be a secret trustee.
Secret trusts arising on intestacy
Although secret trusts generally arise in the context of a testamentary disposition, a secret trust may arise in a case of intestacy, provided that the person entitled to the deceased’s estate on his intestacy had agreed that he would receive the specified property as a trustee and not for himself absolutely.
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