Secret & Half Secret Trusts Flashcards
Where would you usually find a secret/half-secret trust?
Only exists in wills
What was the purpose of a trust of this nature historically?
Used to provide for a mistress or child born out of wedlock
What is a secret trustee known as?
Either a trustee, or in the case of a full secret trust an ‘ostensible beneficiary’
What was set out in McCormack v Grogan?
- Where a person either expressly promises or by his silence implies, that he will carry out the testator’s intentions into effect, and the property is left upon the faith of that promise or undertaking, it is in effect a case of trust
- Trustee expressly or implicitly agrees to do as asked by testator in life
- But the trust or part of it is left unrevealed in the text of the will
What is the problem with creating secret/half-secret trusts?
They must comply with the requirements for wills to be valid in accordance with the Succession Act 1965.
If the trust is not expressly set out in the will, it could be argued that it does not comply with these requirements.
What happens if a secret trust fails?
The intended secret trustee could take the property absolutely
or
Intended secret trustee could hold the property on resulting trust for the testator’s estate.
Why recognise secret trusts?
- Equity will not allow a statute to be used to create a fraud
- ‘Dehors the will’ (outside the will): argument that the secret trust is not subject to succession act as details agreed outside the will.
How does a (fully) secret trust appear in the will?
The fully secret trust will appear as a gift to the beneficiary in a will.
(e.g. ‘My house to Sophie’ might be written in the will, but in reality the testator intends Sophie to keep the house for someone else, has communicated this to her in life and has obtained her assent to this. Although Sophie appears as a beneficiary, she is in fact a secret trustee)
What are the elements of a secret trust as per Lord Westbury in McCormack v Grogan?
- Intention to create a trust must be present
- The testator must have communicated this fact to the secret trustee in life
- The secret trustee must have agreed to this (implicitly or expressly) in life
Which case re-affirmed the requirements for a secret trust?
Blackwell v Blackwell
What different element was set out in Ottaway v Norman?
Could be accepted expressly or by acquiescence
What happened in Cullen v Attorney General for Ireland?
- A gift was set out in the will but intended to be held on secret trust by the recipient for the benefit of a charity.
- A gift to a charity in a will would have been exempt from certain taxes.
- The court held that these taxes were payable here as if the recipient were keeping the gift for themselves.
- This was justified on the basis that the trust had taken effect outside of the will.
Can a beneficiary witness the will?
Yes
Why can a beneficiary witness the will?
- Ordinarily under s 82 of the Succession Act 1965, a beneficiary will lose their interest to any gift under a will if they witness it.
- But as the secret trust is viewed as outside the will, a beneficiary to such a secret trust may witness the will and keep their interest.
What was the decision in O’Brien v Condon?
It was found that the beneficiary could benefit from the secret trust despite witnessing the will
Can a named legatee/devisee witness the will?
It appears so (Re Armstrong)