Secret trusts
What is a trust?
A trust is a legal arrangement used to protect assets, such as land, buildings or money for the benefit of the “beneficiaries” to the trust.
What is a secret trust?
If a “settlor” (the person whose assets are to be placed into trust) wishes to leave property to a person but does not want to name that person in his or her will he or she can create a “secret trust” by leaving the property to another person (usually a solicitor or a trusted friend) to hold on trust for the person he or she wishes to provide for.
Trusts can be “fully secret” or half-secret”.
Fully secret trusts
Where a trust is fully secret there will be no mention of the trust in the will. On the face of it, it will appear that the “testator” (the person whose will it is) has left his or her property to the person named in the will to do with it as they wish. However, if the testator told that person during his or her lifetime that such property was to be held on trust for the testator’s intended beneficiary and that person agreed to act as trustee then a fully secret trust will be created and the trustee will be bound by it.
If the trustee dies before the testator or indicates to the testator that he or she is no longer prepared to act as trustee then the trust comes to an end.
Since the trustee of a secret trust will appear to be the testator’s intended beneficiary under the will fully secret trusts can be open to fraud.
Half-secret trusts
Where a trust is referred to in a will but the intended beneficiary under the trust is not named in the will, the trust is said to be a “half-secret trust”. In such circumstances the name of the trustee will be stated in the will. For this reason fraud is less likely to arise in the case of half-secret trusts.
For a half-secret trust to be valid the testator must have told the trustee before or at the time when the will was made that such property was to be held on trust for the testator’s intended beneficiary and the trustee must have agreed to act as trustee.
If the trustee dies before the testator or indicates to the testator that he or she is no longer prepared to act as trustee then the testator’s personal representatives will take on the role of trustees if the terms of the trust can be ascertained.
When are secret trusts used?
Secret trusts were commonly used in the past when a settlor wished to provide for a mistress or an illegitimate child upon his death without causing unnecessary embarrassment to his family. These days, however, secret trusts are rarely used.