Deck 11: Secret Trusts, Half-Secret Trusts and Mutual Wills

Question 1

The secret trust is a form of express trust.

Answer 1

True

Question 2

What are secret trusts?

Answer 2

Secret trusts are a legal concept in the context of wills and estate planning, where a testator (the person making the will) leaves assets to a trustee on the understanding that the trustee will hold and administer those assets for the benefit of a third party, known as the beneficiary. The unique aspect of a secret trust is that the existence of the trust and the identity of the beneficiary are not disclosed in the will itself; instead, they are communicated to the trustee outside of the will, often through a separate private agreement or oral understanding.

There are two main types of secret trusts: fully secret trusts and half-secret trusts.

1. Fully Secret Trusts:
In a fully secret trust, the will appears to leave the property outright to the named trustee, with no indication that the trustee is to hold the property in trust for someone else. The arrangement between the testator and the trustee is made privately and is not mentioned in the will. The trustee is then honor-bound to carry out the testator's wishes as per their secret agreement. If the trustee fails to do so, they may be legally compelled to fulfill their obligation if the existence of the trust can be proven, typically through evidence provided by witnesses to the agreement.

2. Half-Secret Trusts:
In a half-secret trust, the will indicates that the property is to be held in trust, but it does not specify the details of the trust or the identity of the beneficiary. The details of the trust are communicated to the trustee separately and are not included in the will. Unlike fully secret trusts, half-secret trusts are acknowledged in the will, but their full terms remain secret.

The rationale behind secret trusts is to allow the testator to make provisions for beneficiaries in a confidential manner, which may be desired for various personal reasons, such as privacy concerns, family dynamics, or to prevent potential challenges to the will. However, the secrecy of these trusts can also lead to legal complications, particularly if there is a dispute about the existence or terms of the trust after the testator's death.

To enforce a secret trust, the beneficiary or another interested party must typically provide evidence that the trust exists and that the testator intended for the trustee to hold the property for the benefit of the beneficiary. This can be challenging, especially if the agreement was made orally or if there are no witnesses.

Secret trusts are subject to the laws of the jurisdiction in which they are created, and the specific rules and requirements for creating and enforcing secret trusts can vary. It is advisable for individuals considering a secret trust to consult with a legal professional to ensure that their wishes are carried out as intended and that the trust is legally sound.

Question 3

How do secret trusts differ from half secret trusts?

Answer 3

No Answer.

Question 4

Which section of the Wills Act 1837 provides that no will can be valid unless it is in writing, signed by the testator and witnessed by at least two witnesses present at the same time?

Question 5

In which case did the court set out three criteria for establishing the formation of the secret trust?

Question 6

In which case was this declared, '(t)he more uncertain the terms of the obligation, the more likely it is to be a moral obligation rather than a trust: many a moral obligation is far too indefinite to be enforceable as a trust'?

Question 7

What is a codicil?

Question 8

Does the testator have to communicate his intention to all of his trustees or will just some of them suffice?

Question 9

What are the two main theories that underpin why secret trusts are enforced?

Question 10

Which of these three criteria were set out in Ottaway v Norman as essential in order to establish a secret trust?

A)An obligation that the recipient should hold the property on trust for the 'true' beneficiary.
B)The testator communicated that intention to the recipient.
C)The beneficiary must be aware of the existence of the trust.
D)The recipient accepted the testator's intention. The recipient's acceptance
E)of that obligation could be either express or implied by acquiescence.

Question 11

For half-secret trust to be valid, the trustee must accept his obligations before the testator makes his will.

Question 12

The difficulty with the terms of secret trusts being contained in parol evidence is that they run contrary to the principle of transparency and openness enshrined in section 9 of the Wills Act 1837.

Question 13

In the case of a fully secret trust, it does not matter whether the testator communicates his intention to the trustee either before or after he makes his will.

Question 14

In a fully secret trust, the testator can communicate the terms of the trust to the trustee after the testator's death.

Question 15

For a fully secret trust, communication of the terms of the trust to the trustees can occur before or after the will is written but that must be consistent with what the precise wording of the will states.

Question 16

Acceptance of trustee obligations can be either express or implied.

Question 17

The rationale underpinning the recognition of secret trusts as explained in McCormick v Grogan (1869-70) LR 4 HL 82 is the maxim that equity will not allow a statute to be used as an instrument of fraud.

Question 18

The more modern view as to the rationale supporting the secret trust is that the testator actually creates an express trust whilst is alive. This inter vivos trust is entirely separate from the testator's will.

Question 19

There is no distinction between the requirements for half-secret and fully secret trusts.

Question 20

What is the doctrine of mutual wills?