Secret trusts

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What are secret trusts?
Testamentary trusts
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What is a testamentary trust?
Arise in circumstances where testator leaves legacy in his will on secret understanding the legatee will hold the property on trust for a third party.
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Secret trusts must comply with which legislation?
S9 Wills Act 1837
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When will a will become a public document?
After probate is granted
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Why are secret trusts used?
to avoid knowledge of trust being made public
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What are the reasons for secret trusts?
Flexibility, and allows change
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What are the facts of Crooke v Brooking?
T bequathed £1500 to 2 brothers S & R to hold on secret trust, but terms were only communicated to S. The beneficiaries claimed the legacy
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What was the decision in Crooke v Brooking?
Provided that the terms are communicated during the lifetime of the trustee, equitable obligation becomes attached
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"Statute cannot be...
used as an instrument of fraud"
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What is a fully secret trust?
From the face of the will, the legatee is entitled to the legacy absolutely
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Give an example of a fully secret trust
"£500,000 on legacy for Fred"
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What is the principle in Ottoway v Norman?
It is an essential element that the testator must intend to subject the legatee to an obligation in favour of the beneficiary
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Are ST's express or constructive?
Without mention in the will, secret trusts are constructive
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S53(1)(b) LPA 1925 states that...
The trust must be in writing.
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How is a secret trust proved?
Copies of letters, private records, detail of arrangement to beneficiary
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What is the civil standard of proof?
On the balance of probabilities
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How are HST's proved?
Testator should leave a private record of agreement & disclose the terms to someone else
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What are the facts of Re Keen?
Testator bequathed property on the basis that the terms would be notified to the trustees after the will was created
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What was the decision in Re Keen?
Evidence of the pre-will convo could not be adduced as it contradicted what was said in the will
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What are the facts of Huxtable?
A HST was set up for unspecified purposes and this was indicated in the will. Trustee sought to adduce that this was only for his lifetime and that he would be able to dispose of property under his own will
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What was the decision in Huxtable?
The court would not admit evidence of this as it conflicted with the will statement
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What are the three things needed for a fully secret trust?
Intention, communication & acceptance
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What is the principle in Griffith's?
Secret trust requires certainty of intention that it is a trust to be created
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For a FST there must NOT be...
any precatory words.
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What are the facts of Re Snowden?
Testator bequathed estate to his brother saying 'he will know what to do' and the niece and nephew claimed the benefit
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What was the decision in Re Snowden?
Testator only intended a moral obligation on the brother, his words were insufficient
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Terms of trust must be _______ to trustee.
Communicated
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Communication can be...
oral, letter, fax, email or sign language
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What is the principle in Moss v Cooper?
Communication can occur by an agent
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Communication can be constructive. True or false?
True!
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Give an example of constructive communication.
"Not to be opened until after my death"
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What is the principle in Proby v Landor?
Communication must be made during the lifetime of the testator
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What are the facts of Wallgrave v Tebbs?
Testator left money in his will jointly to Mr T & Mr M. After T's death a draft letter was found specifying how many was to be held but this was not communicated during his lifetime
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What is the decision in Wallgrave v Tebbs?
There was no bounding trust and the trustees were able to keep money for themselves
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What are the facts of Re Boyes?
Testator told the intended trustee he was going to be a secret trustee of the trust and that terms would be communicated to him in his lifetime at a later date. This did not occur
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What was the decision in Re Boyes?
Property was held on resulting trust for the deceased as a promise of future communication was not sufficient
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What is the principle in Re Stead?
If the property is left to legatees as tenants in common, only those communicated to are bound
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What is the principle in Russell v Jackson?
If property is left to legatees as joint tenants and testator communicates terms to any of them, all legatees will be bound by the will
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When must communication occur for HST's?
Before or when the will is created
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What is the principle in John v Ball?
No evidence can be accepted of communication after the will is made
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If no communication is made for a HST...
it is held on resulting trust for the settlor.
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What is the principle in Re Keen?
If the will expressly allows communication to all or any trustees, communication to one trustee will bind other trustees
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What are the facts of Re Bateman?
Testator directed the trustees of the will to set aside £24,000 to pay income 'to such persons named in my sealed letter'
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What was the decision in Re Bateman?
The trust was invalid because it referred to future communication.
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Communication can be...
oral or written
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When can acceptance be made?
Any time before the testator's death
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What is the principle for acceptance in Moss v Cooper?
Acceptance can be expressed by agreement or inferred by silence
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If the testator wishes to increase the legacy...
the trustee must be informed.
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What are the facts of Re Colin Cooper?
Testator bequathed £5000 to legatees and later increased this to £10,000. He never told the trustees
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What was the decision in Re Colin Cooper?
The trust was effective for the first £5000 only.
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What if a beneficiary witnesses the will?
A witness to a will cannot take the legacy of a will.
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What are the facts of Re Young?
Beneficiary under a HST witnessed the will and under s15 his signature was valid but would have to forfeit the gift due to witnessing the will
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What was the decision in Re Young?
S15 was irrelevant as B took the legacy from a HST which operates outside the will
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Which statute governs when the trustee predeceases the testator?
S15 Wills Act 1837
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What happens if a trustee predeceases in a FST?
Property remains the testator's estate
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What happens if a trustee predeceases in a HST?
Trust will not fail as he is not a beneficiary
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What is the principle in Re Gardener?
If a secret beneficiary dies before the testator, the trust will not fail
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If the beneficiary dies before the testator...
property will be held on trust for B's estate
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What is the principle in Re Rees?
A secret trustee cannot take benefit under a will in a HST - He takes property only as a trustee
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Name 2 reasons why secret trusts exist
To prevent fraud & it dehors the will
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Card 2

Front

What is a testamentary trust?

Back

Arise in circumstances where testator leaves legacy in his will on secret understanding the legatee will hold the property on trust for a third party.

Card 3

Front

Secret trusts must comply with which legislation?

Back

Preview of the front of card 3

Card 4

Front

When will a will become a public document?

Back

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Card 5

Front

Why are secret trusts used?

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