Explanation of Secret Trusts: Where they Arise and How they Operate

2775 Words May 30th, 2010 12 Pages
Secret trusts arise where a testator explains to X that they want property to be held on trust for Y and then leaves the property to X in their Will. It is also possible that a secret trust arises where in reliance on a promise to implement the trust by X, no Will is made (Strickland v Aldridge 1804 9 Ves 516 REF1). The onus of proving a secret trust is on the person claiming that it exists, on the balance of probabilities - the 'ordinary civil standard of proof' (Re Snowden 1979 3 All ER 172 REF2). There are three elements necessary for a secret trust (Ottaway v Norman (1971) 3 All ER 1325 REF3). Intention The Testator must intend that the property be used in accordance with a direction. This must be intended as a binding obligation on …show more content…
Pearce and Stevens argue that the trust is 'incompletely constituted' until the death of the testator. The agreement and acceptance to hold the property on trust take place inter vivos but the trust comes into effect when on death, the Will transfers legal title to the trustee (Pearce & Stevens, Reading 14, REF15). Whilst this is a strong argument, the formalities requiring half secret trusts to be communicated and accepted prior to the execution of the Will so as not to ignore the Wills Act, seems inconsistent with the view that secret trusts operate outside the provisions of the Wills Act entirely. Are secret trusts necessary to prevent fraud? The allowance of secret trusts avoiding the requirements of the Wills Act is said to be made to prevent fraud. A trustee agrees to hold property on trust and a gift is made to him on that basis (Re Boyes, REF5). To plead absence of the Wills Act formalities as a defence and thus claim the gift is outright, would be to use statute as an instrument of fraud, and would be against the equitable maxim. Maudsley disagrees, pointing out that with a half secret trust, fraud is rarely an issue as the trust is apparent from the Will and there is no possibility that the legatee can keep the Property (although the intended beneficiary may not get it where terms are not clear) - (Maudsley, pg. 116 REF 16). Where the terms of the trust have not been communicated properly but the