Legal Implications of Secret Trusts in Wills

Introduction

The secret trusts are deemed to act as a response to the drafted Wills Act 1837 and certain requirements are laid down in order to successfully form a will. The concept of secret trust primarily arises in case of a situation where a testator wishes to keep the original beneficiary hidden due to some personal reason since it is a complete public document, the testator can attempt to do so. The written will is then submitted to the PPO (Public Probate Office) and if such a will is considered valid by the office, such a Will shall become functional and held admitted to the probate office which is open to inspection. For any Will to become functional, it is important to abide by the valid requirements of making a will which includes the need have a clear intention which is communicated in the presence of two or more witnesses to the trustee but in case of a secret trust, these formalities do not hold as much importance as it would in cases of a Will as per Section 9 of the Wills Act, 1837. However, to formulate a secret trust, these requirements do not stand mandatory and in cases the testator has not completely abided by these formal requirements, the wishes of the testator is still valued and remains mandatory for the party on who’s name the properties are transferred must carry out the duty to hold the property as a secret trust for the secret beneficiaries.

On the death of the testators, the subject matter of the Will is no longer hidden and can be accessed openly by the public. The idea is to keep either the subject matter of the will hidden for whatever reason it may be and the property will be explicitly named after a friend wherein, the friend or well-wisher, whosoever is chosen by the testator holds the property which can be either personal property or real property in order to benefit the actual secret beneficiary, who is the true beneficiary of the trust as opposed to the ostensible beneficiary, who merely acts on the face of the trust and on behalf of the beneficiary.

The person on whose name the testator transfers the property is termed as the Legatee and in case of a ‘Fully secret Trust’, it is imperative on the testator to have communicated his wish to transfer the property in the name of the legatee before his death, and mention that such a trust is formed and exists and needs to be held by the legatee on behalf of the secret beneficiary. In case of a half secret trust, even though the testator conceals the actual terms concerning the property, there is a sense of acknowledgement that the trust completely exists and the clause separately mentions that the trust has been “communicated” to the persons holding the trust on behalf of the true beneficiaries. The Dehors theory comes into being as there is no space for contradiction in case of equity with respect to the Wills Act, 1837 as it is not covered under the said Act.

The position of Gift 1:

Nelson, the testator, had left £1,000,000 ‘to my trusted companions, Laz Carr and Matt Lowe, absolutely’. The term “absolutely” in this case gives rise to the formation of a fully secret trust as Nelson. However, for any secret trust to be valid, certain requirements are mandatory as held in the case of Ottaway and another v Norman [1972] Ch 698 where ; Firstly, The trustee must be made aware of the subject matter of the trust that is being hold instead of the beneficiary , Secondly, The communication of such an intention must be done within the lifetime of the testator and the obligation must be considered accepted by the legatees. In case of a fully secret trust, the communication must be completed within the lifetime of testator. However, Nelson had communicated to Carr about the trust which was to be hold alongwith Lowe the trust of £1,000,000 for Horatia. Even though Carr had full knowledge of such a trust, Lowe claimed that the had no knowledge of the trust until Nelson’s death. At this point, the position of such a trust may be dicey. Since, communication of the trust plays an important role, Carr is bound by the obligation of the trust and must hold the trust on behalf of Horatia but Lowe had no idea he was being given this obligation, thus it can be considered as not accepted by Lowe and he can be made free of such an obligation as the consent and acceptance of both the trustees are extremely important. This position of trust held by Co-owners was also decided in the case of Re Stead [1900] 1 Ch 237., where the trust failed as one of the important criteria of a fully secret trust was unfulfilled.

Position of Gift 2:

As held in Blackwell v. Blackwell, the communication in case of a Half secret trust is much stricter and contains provisions that indicate that the communication has been done by the testator to the legatee by using phrases like, “indicated by me to them” as held in the case. Likewise, Nelson had given the Merton house located in London to Jack Tar to hold it on trust and had also mentioned that the trust has been communicated to him (Jack Tar) in certain knowledge that he will carry out the instruction as given. The communication in case of a half secret trust must be made certainly at any time before or at the time when the will is being executed. The communication also confirms that Jack Tar had full knowledge of the trust and the latent intention that the trust is being created for Horatia, his illegitimate daughter, thus, such a trust is deemed to be constructed and accepted by the legatee.

Position of Gift 3:

A large Sapphire was considered given to Emma, a good friend of Nelson and in terms “Absolutely” that has been signified earlier to form a fully secret trust. later Emma comes to know that the trust is held on behalf of Captain Salt, who is Horatia’s fiancé. However, Captain Salt was killed in a boating accident before the death of Nelson. Generally, it is a considered law that the beneficiary to benefit under the will must be alive before the testator’s death as under The Succession Act, 1965 but Captain Salt had predeceased Nelson. In this case, as per the condition that the beneficiary is intended to enjoy the trust and the interest awakens as soon as the will is made since it is considered that Wills are in general adapted to walking. Thus, in the case of Re Gardener (1923), it was held that , since the share of the beneficiary was formed under trust and not technically under a will, in that case, this trust is not affected by the doctrine of lapse. Thus, the Captain Salt is still the right beneficiary of the trust but since he was not alive any longer, the property therefore goes onto the hands of Horatia as she is the sole beneficiary of Salt’s estate.

To answer the first half of the question, as to whether Horatia is the rightful beneficiary and she had full knowledge of Nelson’s intention with respect to all three gifts that were formed under three separate trusts. Analyzing the position of all three gifts, none of the trust failed and completed all the requirements to form a valid trust, thus Horatia, is definitely eligible to get all three gifts as it was held under both Fully secret trusts and Half secret trusts.

For the second part of the answer, it is largely understood that the trustee appointed for a secret trust has the power to be a witness to the will as has been held in the case of Re Ray and as well as Re Young. However, it has been held in Re Young that in case of a secret beneficiary does not necessarily have to be aware of the formation of the secret trust, let alone the kind of trust is formed when the will is being witnessed by the secret beneficiary. In that case, such witness by the secret beneficiary is acceptable but in case of the secret beneficiary is aware of the existing secret trust that is being formed, in that case, possible conflicts may arise in the future. As in the case of Re Fleetwood (1880), it was held that since the beneficiary had witnessed the will, such a legacy had failed.

Thus, If Horatia were to witness the will without the knowledge of it being a secret trust, such can be upheld and accepted as it would have been otherwise, but in case she was aware of the secret trust, there could be possible disputes and such legacy may not be upheld.

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BIBLIOGRAPHY

Journals

White, E. Wyndham. "Secret Trusts: Admissibility of Evidence." The Modern Law Review 2, no. 4 (1939): 319-21. Accessed March 6, 2021. https://www.jstor.org/stable/1090129.

Chris Mallon, “Secret Trust” < https://chrismallonlawtutor.com/equity-and-trusts/secret-trusts-essay/#_edn6> accessed on 6th March, 2021

City College, “ Types of Trust: Secret Trust”, < https://citycolleges.ie/app/uploads/Equity-and-Trusts-Chapter-5.pdf > accessed on 6th March, 2021

Cases

Ottaway and another v Norman [1972] Ch 698

Re Stead [1900] 1 Ch 237

Blackwell v. Blackwell. [1929] AC 318

Re Gardener 2 [1923] 92 L.J.Ch.569

Re Ray 1936] Ch. 520

Re Young [1951] Ch 344

Re Fleetwood (1880) 15 Ch D 594, ...

Statutes

The Succession Act, 1965

The Wills Act, 1837