Photo credit: Kristina Flour
What are secret trusts and half secret trusts? Sometimes you might want to leave a gift without putting the beneficiary’s details onto a will. There are all sorts of reasons why this might happen – not least: wills are public documents once Probate is granted. The beneficiary may want to remain private.
It is possible to do this. Bear in mind the risks of the beneficiary not receiving their gift (particularly in the case of fully secret trusts). A trustee is provided with a gift along with instructions on the terms on which they have to hold that gift. The trustee usually has to pass the gift onto a third party beneficiary.
For a secret or half secret trust to apply the following must occur (from obiter dicta from Blackwell v Blackwell ):
1. The terms communicated to the trustee (it is a good idea to do this in writing);
2. Terms must be communicated before or at the same time as the will i.e. get agreement before you sign the will;
3. The trustee must accept the terms before or at the same time as the will.
Half secret trusts
A half secret trust provides a gift along with directions in the will e.g. “as per the terms of a letter provided to the trustee”. It is clear on the face of the will that a gift is to be held on trust for another.
Fully secret trusts
A fully secret trust provides a gift to a trustee but there is no indication in the will that the trustee is anything other than a normal beneficiary. The instrument creating the trust (e.g. the letter) is not referred to in the will.
Dangers and drawbacks of secret trusts and half secret trusts
A trustee is bound by a fiduciary duty to act in good faith. However, it is possible that a trustee could act dishonestly. If a trustee dies before you but the intended secret beneficiary survives then all is not lost. There is an equitable doctrine that “a trust must not fail for want of a trustee”. Therefore an alternative trustee can be found. Bear in mind that if there is a fully secret trust that nobody else knows about and the trustee dies: the gift is likely to fail anyway.