Question 1

The secret trust is a form of express trust.

Accepted Answer

A secret trust is a type of express trust that is not specified in the will, but instead is communicated by the testator to the trustee before their death. It is called "secret" because it is not publicly disclosed in the will, but it must still meet the requirements of an express trust.

Question 2

What are secret trusts?

Accepted Answer

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?

Accepted Answer

Secret trusts and half-secret trusts are both mechanisms in the law of trusts and wills that allow a testator (the person making a will) to leave property to a trustee without openly disclosing the full details of the trust in the will. However, they differ in terms of their formation and the way they are communicated.

Secret Trusts:
A secret trust, also known as a fully secret trust, arises when a testator leaves assets to a person (the trustee) in their will, but the will does not disclose the existence of a trust or the intended beneficiaries. The understanding that the trustee is to hold the property in trust for the benefit of the secret beneficiaries is communicated to the trustee outside of the will, often verbally or in a separate document. This communication must occur before or at the time of the execution of the will.

The key characteristics of a secret trust are:
- The will appears to make an outright gift to the trustee.
- The existence of the trust and the identity of the beneficiaries are not disclosed in the will.
- The details of the trust are communicated to the trustee separately and must be done before or at the time of the execution of the will.

Half-Secret Trusts:
A half-secret trust, on the other hand, is indicated in the will itself. The will states that the property is to be held in trust, but it does not specify the details of the trust or who the beneficiaries are. These details are communicated to the trustee separately and, like a secret trust, must be done before or at the time of the execution of the will.

The key characteristics of a half-secret trust are:
- The will indicates that the property is to be held in trust, but the terms of the trust are not detailed in the will.
- The identity of the beneficiaries is not disclosed in the will.
- The details of the trust are communicated to the trustee separately and must be done before or at the time of the execution of the will.

The main difference between secret and half-secret trusts lies in the disclosure within the will. In a secret trust, there is no indication of a trust in the will, while in a half-secret trust, the will indicates that the property is to be held in trust, but without revealing the full details or the beneficiaries.

Both types of trusts are enforced on the basis of the principle that "equity will not allow a statute to be used as an instrument of fraud." This means that the courts will enforce these trusts to prevent the trustee from keeping the property for themselves, as this would be against the testator's intentions and would constitute a fraud on the beneficiaries.

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?

Accepted Answer

The answer of Which section of the Wills Act 1837...

Question 5

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

Accepted Answer

The answer of In which case did the court set...

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'?

Accepted Answer

The answer of In which case was this declared, '(t)he...

Question 7

What is a codicil?

Accepted Answer

The answer of 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?

Accepted Answer

The answer of Does the testator have to communicate his...

Question 9

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

Accepted Answer

The answer of What are the two main theories that...

Question 10

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

Accepted Answer

Ottaway v Norman established three essential criteria to establish a secret trust: first, an obligation that the recipient should hold the property on trust for the 'true' beneficiary; second, the testator must communicate that intention to the recipient; and third, the recipient must accept the testator's intention, which could be either express or implied by acquiescence. The beneficiary's awareness of the existence of the trust is not a necessary criterion.

Question 11

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

Accepted Answer

This is true, as the acceptance by the trustee is a crucial element in creating a valid half-secret trust. The trustee must accept their obligations before the testator passes away, in contrast to a fully secret trust where the trustee may accept their role after the testator's death.

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.

Accepted Answer

The principle of transparency and openness is indeed enshrined in section 9 of the Wills Act 1837, which requires wills to be in writing and signed by the testator in the presence of witnesses. Allowing secret trusts to be established through parol evidence goes against this principle.

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.

Accepted Answer

In a fully secret trust, the communication of the intention to the trustee can happen before or after the testator makes the will. The crucial element is that the trust is not mentioned in the will, and the trustee is not named in it.

Question 14

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

Accepted Answer

In a fully secret trust, the terms must be communicated to the trustee during the testator's lifetime; communication cannot occur 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.

Accepted Answer

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

Question 16

Acceptance of trustee obligations can be either express or implied.

Accepted Answer

Trustee obligations can explicitly be accepted through an express agreement, or implicitly accepted through actions or circumstances that suggest a trustee relationship has been established.

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.

Accepted Answer

The rationale for recognition of secret trusts, as explained in McCormick v Grogan, is indeed based on the principle that equity will not allow a statute to be used as an instrument of fraud. In this case, the testator had transferred legal title of his property to another person, but had intended that person to hold the property in trust for a third party. Such trusts are known as "secret trusts" because their existence is not disclosed in the will. The court recognized the trust because to do otherwise would allow the law of wills to be used as an instrument of fraud by allowing the trustee to retain the property for himself.

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.

Accepted Answer

The more modern view is indeed that the testator creates an express trust while alive, which is separate from the will.

Question 19

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

Accepted Answer

The requirements for half-secret and fully secret trusts are the same. In both types of trusts, there must be certainty of intention to create a trust, certainty of subject matter, and certainty of the beneficiaries. However, in a half-secret trust, the existence of the trust is known to the trustee and the intended beneficiary, while in a fully secret trust, the existence of the trust is unknown to the intended beneficiary.

Question 20

What is the doctrine of mutual wills?

Accepted Answer

The answer of What is the doctrine of mutual wills?...

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