A secret trust is where a person wishes to leave a gift to someone, but they do not want this to become public knowledge. Because of the secrecy which comes with a secret trust, it’s important that if a person wants to create a secret trust, then this is planned carefully.
It’s vital that a secret trust is planned with expert advice, this ensures you understand both the advantages and disadvantages of a secret trust.
How do secret trusts work?
As the name suggests, the idea of a secret trust is that there is an element of secrecy. The testator (person leaving the gift) states that the trustee is to either receive the gift themselves or is to hold onto a gift, which is intended for another party. If the gift is intended for a third party, then only the testator and the trustee should know the details of this beneficiary,
Communicate regarding the secret trust must be made prior to the testator’s passing. Your intentions must be discussed with the intended trustee, and they must accept this role. It is very important that you have full trust in your trustee that they will carry out your wishes. Secret trusts cannot be incorporated into a Will without the trustee of this having prior knowledge. Neither can a secret trust be incorporated into your Will if after prior communication the trustee denied accepting the secret trust.
A trustee is under the same legal obligations as any other trustee in a Will. However, deniability of the secret trust is easier, because only the two parties had knowledge of the agreement.
History of the Secret Trust
Many years ago, secret trusts were a way for people to leave gifts and assets to unknown partners, spouses, and children. This allowed them to leave assets in secret, without immediate family or a spouse finding out.
There are two types of secret trusts, and these have distinct differences….
- Fully secret trusts
With a fully secret trust, the actual existence of the trust is known by the person leaving the gift (the testator) and the person receiving the gift (the trustee). So the true intentions of the gift will remain secret to all, apart from the two people involved. E.g. A Will may state ‘I leave £1,000 to Sarah’. But, Sarah understands that she will receive the £1,000 on trust, which is intended for the local dog shelter.
- Half secret trusts
Whereas a half-secret trust does hint towards some sort of secret to who the beneficiary will be. The Will could state something like ‘I leave £1,000 to Sarah to hold the trust that has been previously discussed’. However, Sarah is still the only one who knows the intended receiver of the gift.
If you would like to discuss the implications of a secret trust with members of the Beeston Shenton Wills & Probate team, please get in touch. Call us on 01782 662424 or email us at firstname.lastname@example.org