Secret trusts

Creation and formalities 

A trust of land generally needs to be made in writing while a testamentary disposition needs to be signed or acknowledged by the testator in the presence of two or more attesting witnesses.

In the case of secret trusts the gifts are not fully included or defined in the will but take effect as if they were. The principles provide for situation where a testator wishes to make a certain disposition but does not want to make that gift publicly known.

The usual creation takes place with the testator arranging to leave a legacy to a trusted fried or often a solicitor who undertakes to hold it upon certain trusts for the benefit of another person or object. There must be evidence that at the time of creation the testator intended to impose a legally binding obligation as opposed to purely moral.

If the will makes a reference to another document in defining a trust, then the document will become incorporated into the will. As a result the trusts will be treated as if set out in the will irrespectively of the intention of the testator to create a secret trust. Therefore, the advantage of secrecy will be lost.

There are two types of secret trusts – fully secret and half-secret trusts and the differences are discussed below.

Fully secret trusts

  • A fully secret trust is a trust of which there is no mention in the testator’s will. The property is given to the person apparently beneficiary. However, the testator must have communicated to that person during his lifetime certain terms of trusts on which the property is to be held. This will normally include defining who the trust is to benefit and the identity of the property to be held on trust. If the testator’s wish to create a secret trust has not been communicated, no trust can result even if there is evidence to the intention. Therefore, no trust can be established and no equitable remedy exists if after the death of the testator documents are found evidencing of his intention to create a secret trust but such was never communicated.  

  • If the testator discloses to the legatee the fact that he is to hold the legacy on trust, but fails to inform him of the terms of that trust, then the trustee will hold on resulting trust for the estate.

  • After the wish to create a trust is communicated, on his part the trustee has to accept a secret trust and he may do so by express words or by silent acquiescing in it.  

  • In case the trustee renounces or dies before the testator, the trust cannot operate. 

Unlock this article now!

 

For more information on:

  • Half-secret trusts
  • Secret trustee and benefit