1 December 2021
The Secret Trust
By Miranda Marshall, Director, Hayes + Storr.
The fully-secret and the half-secret trust has as romantic a tinge to it as the otherwise dry subject of trust law ever can. It would make a great subject for a Victorian novel.
A secret trust can be a useful way of leaving a gift in your Will if you do not wish the details of that gift to become public or even family knowledge. Historically, a secret trust was used by those wishing to provide for extra-marital partners or illegitimate children without revealing the relationships.
In this modern world of openness, so that people’s technicolour lives are out in the open and with what would formerly have been dirty little secrets no longer needing to be hidden away behind a veneer of establishment respectability, the demand for such trusts is not what it was. In practice a secret trust is not to be recommended, but it can have its uses.
There are many reasons why someone may wish to keep details of a legacy private, rather than see it published in their Will after their death. Extra care needs to be taken in the use of a secret trust as all sorts of complications can arise.
Secret trusts are legally recognised, though they are not taken inadvisedly, lightly or wantonly. If you do intend to make a secret trust, make sure you obtain expert advice and that you understand the risks.
Secret trusts are secret. By a secret trust, assets are left either outright to the trustee or to the trustee to hold on trust. Behind the scenes the trustee is given precise instructions to hold the assets for another person on a secret basis. As there is no means of knowing about and therefore scrutinising or overseeing the trust, it is imperative that the testator has full and unquestionable faith in their chosen trustee to carry out their wishes.
A trustee of a secret trust is under the same legal obligations as any other trustee, but it is easy for the trustee of a secret trust to deny the trust’s existence. So, it can be tricky for the intended beneficiary even to know about, let alone assert, their rights, unless there is documentary evidence.
There are two types of secret trust: the fully-secret trust and the half-secret trust. What is the difference?
By a fully-secret trust, the existence of the trust is known only by the testator and the trustee. On the face of the Will the testator appears to leave an outright gift to the trustee. For example, a Will might state ‘I leave £10,000 to Norman’, where the testator has told Norman that he is to hold the £10,000 on trust for the benefit of his close friend Tallulah.
With a half-secret trust, the instructions that assets are to be held on trust is apparent by the Will; however, the beneficiary is a secret. Here, the Will might state ‘I give £10,000 to Norman to hold on the trust I have made known to him’; there, only Norman knows that the money is to be held for Tallulah’s benefit.
So, what if you are a trustee or beneficiary of a secret trust? Agreeing to become a trustee of any trust is not a decision that should be taken lightly. This is even more so in the case of a secret trust, as a dispute is more likely to lead to litigation. Before agreeing to become trustee of a secret trust, you should be clear about the role and responsibilities in relation to the trust and take advice, if needed.
If you believe that you are the beneficiary of a secret trust and that you are being denied your rights, you should take advice to establish what you are entitled to and how to enforce your entitlement.
Charles II said on his death bed ‘Let not poor Nelly starve’. He asked his brother to look after his mistresses, including Nell Gwynne, whose prior occupation had been an orange seller. The Wills of royalty are secret, so we do not know what it contained.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.