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 knowledge. Historically, secret trusts were used by those wishing to pass assets to extra-marital partners or illegitimate children without revealing the relationships to the immediate family.
‘Secret trusts are legally recognised, though not lightly,’ says Laura Staples, Head of the wills and probate team with Humphries Kirk. ‘If you do intend to make a secret trust, make sure you obtain expert advice and that you understand the potential pitfalls.’
Secret trusts explained
Secret trusts are, by their very nature, secretive. Within a secret trust, assets are left either outright to the trustee or to the trustee to hold on trust. However, behind the scenes the trustee has given explicit instructions to hold the assets for a third party who is unknown to any other person. Whilst this allows for redirection of assets without your wishes becoming public knowledge, it does mean that you are heavily reliant upon the confidence you place in your chosen trustee.
A trustee of a secret trust is under the same legal obligations as any other trustee, but from a practical perspective it is far easier for the trustee of a secret trust to deny the trust’s existence. It can also prove extremely difficult for an intended beneficiary to assert their rights without appropriate documentary evidence.
Fully secret and half secret trusts – what is the difference?
There are two types of secret trust.
Under a fully secret trust, the existence of the trust is known only by the testator and the trustee. For example, a will might state ‘I leave £10,000 to Joe’, whereas the testator has in fact told Joe that he is to hold the £10,000 on trust for the benefit of the local animal shelter.
With a half secret trust, the fact that the assets are to be held on trust is known from the terms of the will, however the beneficiary remains a secret. Here, the will clause might state ‘I give £10,000 to Joe to hold on the trust we have previously discussed’, and only Joe knows that the money is to be held for the benefit of the local animal shelter.
In order to form a valid secret trust, you must communicate your intention to create the secret trust to your trustee and your trustee must accept the role.
What if you are a trustee or beneficiary of a secret trust
Before agreeing to become trustee of a secret trust, you should seek advice as to the role and your responsibilities in relation to the trust.
If you believe that you are the beneficiary of a secret trust and that you are being denied your rights under its terms, you should seek advice as to your position and the steps you can take to ensure that the trust is enforced.
Whether you are a trustee or a beneficiary, our solicitors can provide you with the expert advice necessary to navigate this tricky area.
How else can we help?
If you are not a trustee or beneficiary, but you think you may wish to set up a secret trust, we can advise you in relation to this.
Our solicitors can advise you on secret trusts, as well as your more general requirements to help make sure that your wishes are clear and legally binding in your will.
For further information, please contact the team.