When someone dies, a Grant of Probate (if obtained) makes that person’s will a public document, available for public scrutiny. Using a secret trust can help conceal the true recipient of a gift on death.
A secret trust is an exception to the formalities contained in s.9 of the Wills Act 1837. Normally a testator must express his intention to benefit someone in the Will and include the terms of any trust. A secret trust does not have to be disclosed in this way as equity will impose a duty on the party appearing to acquire the property under the Will to carry out the wishes of the testator. This is normally to hold the assets on trust for the secret beneficiaries.
Originally, Secret Trusts were used for mistresses and illegitimate children and consist of two types: Fully Secret Trusts and Half Secret Trusts.
A fully secret trust is one of which there is no evidence at all within the Will. The gift will simply be ‘to A absolutely’. A half secret trust will leave a gift ‘to A on the terms which I have communicated to him’ or some similar declaration showing that there are additional provisions in existence. In both cases the additional provisions must have been communicated to the recipient during the testator’s lifetime. This communication can be before or after the signing of the Will. The obligation of holding property on trust must also be accepted by the trustee.
Because of the nature of these trusts there has, historically, been problems in enforcing the trust by the intended beneficiary. Problems are also encountered where a secret trustee or secret beneficiary predeceases the testator.
Although there is less call for secret trusts it may be that your clients wish to benefit individuals without naming them specifically within the Will. An alternative (and perhaps more secure way of doing this) is to create a lifetime trust, naming the beneficiaries and appointing the trustees, and then leave a gift into the trust under the terms of the Will. The Will itself does not name the ultimate beneficiaries and the trustees powers are contained within a separate, ‘private’ document. This avoids the problem of enforcement by the beneficiaries as their entitlement is clearly established under the trust document. The trust can also be drafted to be fully discretionary so that the trustee can release funds in accordance with the testator’s wishes and in the best interest of the beneficiaries.
This is particularly useful where there is concern about how a beneficiary may use the funds if they were to receive them as an absolute gift.
This has the same effect as establishing a discretionary trust within the Will but again keeps the details of the beneficiaries secret.
