A secret trust is a trust which arises when property is left to a person (the legatee) under a will on the understanding that they will hold the property as trustee for the benefit of beneficiaries who are not named in the will.
A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers ("settles") a property upon the second party for the benefit of the third party, the beneficiary.
A legatee, in the law of wills, is any individual or organization bequeathed any portion of a testator's estate.
Trustee is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another. A trustee can also refer to a person who is allowed to do certain tasks but not able to gain income. Although in the strictest sense of the term a trustee is the holder of property on behalf of a beneficiary, the more expansive sense encompasses persons who serve, for example, on the board of trustees of an institution that operates for a charity, for the benefit of the general public, or a person in the local government.
Secret trusts are divided into two types:
- Fully secret trusts, where the will is totally silent as to the existence of a trust; and
- Semi secret trusts or half secret trusts, where the will provides that the legatee is to hold the property on trusts, but does not specify the terms of the trust or the beneficiary.
Secret trusts are something of a historical anachronism. They arose because in most common law jurisdictions, wills are public documents after they have been admitted to probate, and where the testator wishes to leave a legacy to (for example) a mistress or an illegitimate child without causing pain or embarrassment to his family, he could devise the property to a trusted person to avoid the name of the mistress or illegitimate child appearing in the will. They fall outside of the Wills Act.
In law, common law is that body of law derived from judicial decisions of courts and similar tribunals. The defining characteristic of “common law” is that it arises as precedent. In cases where the parties disagree on what the law is, a common law court looks to past precedential decisions of relevant courts, and synthesizes the principles of those past cases as applicable to the current facts. If a similar dispute has been resolved in the past, the court is usually bound to follow the reasoning used in the prior decision. If, however, the court finds that the current dispute is fundamentally distinct from all previous cases, and legislative statutes are either silent or ambiguous on the question, judges have the authority and duty to resolve the issue. The court states an opinion that gives reasons for the decision, and those reasons agglomerate with past decisions as precedent to bind future judges and litigants. Common law, as the body of law made by judges, stands in contrast to and on equal footing with statutes which are adopted through the legislative process, and regulations which are promulgated by the executive branch. Stare decisis, the principle that cases should be decided according to consistent principled rules so that similar facts will yield similar results, lies at the heart of all common law systems.
Despite their rarity, secret trusts still remain a staple of many law courses at university level, as they represent a rare exception to the rule that any disposition on death must be by way of a will (or a document incorporated by reference into a will) which complies with the applicable statutory requirements in the relevant jurisdiction. [1] Historically, the courts have felt it more important to uphold the rights of the putative beneficiary and to avoid the unjust enrichment of the legatee than to uphold the general rule of public policy that property must devolve by will on death.
Death is the permanent cessation of all biological functions that sustain a living organism. Phenomena which commonly bring about death include aging, predation, malnutrition, disease, suicide, homicide, starvation, dehydration, and accidents or major trauma resulting in terminal injury. In most cases, bodies of living organisms begin to decompose shortly after death.
Incorporation by reference is the act of including a second document within another document by only mentioning the second document. This act, if properly done, makes the entire second document a part of the main document. Incorporation by reference is often done in creating laws as well as in contract law and trust and estate law.
In contract law, unjust enrichment occurs when one person is enriched at the expense of another in circumstances that the law sees as unjust. Where an individual is unjustly enriched, the law imposes an obligation upon the recipient to make restitution, subject to defences such as change of position. Liability for an unjust enrichment arises irrespective of wrongdoing on the part of the recipient. The concept of unjust enrichment can be traced to Roman law and the maxim that "no one should be benefited at another's expense": nemo locupletari potest aliena iactura or nemo locupletari debet cum aliena iactura.
The All-Woman Supreme Court in Texas was convened to deal with the results of a secret trust. [2]
The All-Woman Supreme Court refers to a special session of the Supreme Court of Texas which met in 1925. It sat for five months, and was the first all-female supreme court in the history of the United States.
A will or testament is a legal document by which a person, the testator, expresses their wishes as to how their property is to be distributed at death, and names one or more persons, the executor, to manage the estate until its final distribution. For the devolution of property not disposed of by will, see inheritance and intestacy.
Wills have a lengthy history.
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person. One party, for example, a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to another party, who, for example, has entrusted funds to the fiduciary for safekeeping or investment. Likewise, asset managers, including managers of pension plans, endowments, and other tax-exempt assets, are considered fiduciaries under applicable statutes and laws. In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice, or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts.
A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.
Probate is the judicial process whereby a will is "proved" in a court of law and accepted as a valid public document that is the true last testament of the deceased, or whereby the estate is settled according to the laws of intestacy in the state of residence [or real property] of the deceased at time of death in the absence of a legal will.
Estate planning is the process of anticipating and arranging, during a person's life, for the management and disposal of that person's estate during the person's life and at and after death, while minimizing gift, estate, generation skipping transfer, and income tax. Estate planning includes planning for incapacity as well as a process of reducing or eliminating uncertainties over the administration of a probate and maximizing the value of the estate by reducing taxes and other expenses. The ultimate goal of estate planning can be determined by the specific goals of the client, and may be as simple or complex as the client's needs dictate. Guardians are often designated for minor children and beneficiaries in incapacity.
An express trust is a trust created "in express terms, and usually in writing, as distinguished from one inferred by the law from the conduct or dealings of the parties." Property is transferred by a person to a transferee, who holds the property for the benefit of one or more persons, called beneficiaries. The trustee may distribute the property, or the income from that property, to the beneficiaries. Express trusts are frequently used in common law jurisdictions as methods of wealth preservation or enhancement.
A purpose trust is a type of trust which has no beneficiaries, but instead exists for advancing some non-charitable purpose of some kind. In most jurisdictions, such trusts are not enforceable outside of certain limited and anomalous exceptions, but some countries have enacted legislation specifically to promote the use of non-charitable purpose trusts. Trusts for charitable purposes are also technically purpose trusts, but they are usually referred to simply as charitable trusts. People referring to purpose trusts are usually taken to be referring to non-charitable purpose trusts.
The Hague Convention on the Law Applicable to Trusts and on their Recognition, or Hague Trust Convention is a multilateral treaty developed by the Hague Conference on Private International Law on the Law Applicable to Trusts. It concluded on 1 July 1985, entered into force 1 January 1992, and is as of September 2017 ratified by 14 countries. The Convention uses a harmonised definition of a trust, which are the subject of the convention and sets Conflict rules for resolving problems in the choice of the applicable law. The key provisions of the Convention are:
In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the settlor is usually referred to as the testator. The settlor may also be the trustee of the trust or a third party may be the trustee. In British common law it has been held, controversially, that where a trustee declares an intention to transfer trust property to a trust of which he is one of several trustees, that is a valid settlement notwithstanding the property is not vested in the other trustees.
In trust law, a beneficiary or cestui que use, a.k.a. cestui que trust, is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often happens in sophisticated commercial transaction structures. With the exception of charitable trusts, and some specific anomalous non-charitable purpose trusts, all trusts are required to have ascertainable beneficiaries.
In common-law jurisdictions, administration of an estate on death arises if the deceased is legally intestate, meaning they did not leave a will, or some assets are not disposed of by their will.
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United States trust law is the body of law regulating the legal instrument for holding wealth known as a trust.
English trust law concerns the creation and protection of asset funds, which are usually held by one party for another's benefit. Trusts were a creation of the English law of property and obligations, but also share a history with countries across the Commonwealth and the United States. Trusts developed when claimants in property disputes were dissatisfied with the common law courts and petitioned the King for a just and equitable result. On the King's behalf, the Lord Chancellor developed a parallel justice system in the Court of Chancery, commonly referred as equity. Historically, trusts were mostly used where people left money in a will, created family settlements, created charities, or some types of business venture. After the Judicature Act 1873, England's courts of equity and common law were merged, and equitable principles took precedence. Today, trusts play an important role in financial investments, especially in unit trusts and pension trusts, where trustees and fund managers usually invest assets for people who wish to save for retirement. Although people are generally free to write trusts in any way they like, an increasing number of statutes are designed to protect beneficiaries, or regulate the trust relationship, including the Trustee Act 1925, Trustee Investments Act 1961, Recognition of Trusts Act 1987, Financial Services and Markets Act 2000, Trustee Act 2000, Pensions Act 1995, Pensions Act 2004 and the Charities Act 2011.
The Wills Act 1837 is an Act of the Parliament of the United Kingdom that confirms the power of every adult to dispose of their real and personal property, whether they are the outright owner or a beneficiary under a trust, by will on their death (s.3). The act extends to all testamentary dispositions or gifts, where "a person makes a disposition of his property to take effect after his decease, and which is in its own nature ambulatory and revocable during his life." As of 2012, much of it remains in force in England and Wales.
The creation of express trusts in English law must involve four elements for the trust to be valid: capacity, certainty, constitution and formality. Capacity refers to the settlor's ability to create a trust in the first place; generally speaking, anyone capable of holding property can create a trust. There are exceptions for statutory bodies and corporations, and minors who usually cannot hold property can, in some circumstances, create trusts. Certainty refers to the three certainties required for a trust to be valid. The trust instrument must show certainty of intention to create a trust, certainty of what the subject matter of the trust is, and certainty of who the beneficiaries are. Where there is uncertainty for whatever reason, the trust will fail, although the courts have developed ways around this. Constitution means that for the trust to be valid, the property must have been transferred from the settlor to the trustees.
In English law, secret trusts are a class of trust defined as an arrangement between a testator and a trustee, made to come into force after death, that aims to benefit a person without having been written in a formal will. The property is given to the trustee in the will, and he would then be expected to pass it on to the real beneficiary. For these to be valid, the person seeking to enforce the trust must prove that the testator intended to form a trust, that this intention was communicated to the trustee, and that the trustee accepted his office. There are two types of secret trust — fully secret and half-secret. A fully secret trust is one with no mention in the will whatsoever. In the case of a half-secret trust, the face of the will names the trustee as trustee, but does not give the trust's terms, including the beneficiary. The most important difference lies in communication of the trust: the terms of a half-secret trust must be communicated to the trustee before the execution of the will, whereas in the case of a fully secret trust the terms may be communicated after the execution of the will, as long as this is before the testator's death.
Constructive trusts in English law are a form of trust created by the English law courts primarily where the defendant has dealt with property in an "unconscionable manner"—but also in other circumstances. The property is held in "constructive trust" for the harmed party, obliging the defendant to look after it. The main factors that lead to a constructive trust are unconscionable dealings with property, profits from unlawful acts, and unauthorised profits by a fiduciary. Where the owner of a property deals with it in a way that denies or impedes the rights of some other person over that property, the courts may order that owner to hold it in constructive trust. Where someone profits from unlawful acts, such as murder, fraud, or bribery, these profits may also be held in constructive trust. The most common of these is bribery, which requires that the person be in a fiduciary office. Certain offices, such as those of trustee and company director, are always fiduciary offices. Courts may recognise others where the circumstances demand it. Where someone in a fiduciary office makes profits from their duties without the authorisation of that office's beneficiaries, a constructive trust may be imposed on those profits; there is a defence where the beneficiaries have authorised such profits. The justification here is that a person in such an office must avoid conflicts of interest, and be held to account should he fail to do so.
The South African law of succession prescribes the rules which determine the devolution of a person's estate after his death, and all matters incidental thereto. It identifies the beneficiaries who are entitled to succeed to the deceased's estate, and the extent of the benefits they are to receive, and determines the different rights and duties that persons may have in a deceased's estate. It forms part of private law.
