INTRODUCTION. sign the document in the presence of two

INTRODUCTION.

 A secret trust arises when a testator leaves a
property to another person, and both parties agree that the they will ‘hold the
property for the benefit of another person’ 1. A fully secret trust arises
when the legatee appears on the face of the will to take the property
absolutely, but in truth takes the title ‘subject to the terms of the secret
trusts’ 2. However, in contrast, a half-secret trust arises where the
existence of a trust is clear in the will but the terms that are attached
remain undisclosed 3. Upon the grant of a probate, the secret that was
previously undisclosed will then be revealed. This means that a secret trust
can then be used as a mechanism for the advantage of people after death without
details being disclosed.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

This research
will aim to analyse secret trusts, and any theoretical justifications for upholding
them will also be analysed. There will also be an analysis of the arguments
that have been raised to abolish the doctrine of secret trusts, it shall be
submitted that there is a need for the continued operation of secret trusts and
how it affects modern society and the more complex family structures.

 

THE SECRET
TRUST.

For a
valid secret trust to be created, the testator must have the necessary intent
to create the trust, they must communicate their intent to the trustee, and the
trustee must also give their agreement to accept the terms of the trust 4. According
to the Wills Act 1837, the testamentary inheritance must be in written form and
the testator must sign the document in the presence of two witnesses 5. As secret
trusts take form of testamentary inheritance that do not need to be witten nor
need to appear on the will, this form of trust can be said to avoid the will of
Parliament as long as they sidestep the regulatory requirements set by the
Wills Act 1837. The Law of Property Act 1925, states that any valid trust of
land must be evidenced in writing 6. However, courts have upheld secret
trusts of land, even though they are not in writing 7 this mean that this
form of trust evades statutory formality provision that has been expressly
required by an Act of Parliament.

The
statutory provisions are there for a number of fundamental reasons, these
include reducing the likelihood of fraud, ensuring the use of reliable Witten
precedent documents and promoting the use of professional lawyers who are skilled
at ensuring that property is effectively assigned 8. The conditions set by
the Wills Act 1837, shows that Parliament aimed to put ‘a premium on certainty’
9 by insisting that these conditions be adhered to for inheritance 10. Parliament’s
aim for certainty and clarity is further supported by the Law of Property Act
1925, in relation to trust of land. The law requires that the parties comply
with the rules set in relation to trust so there is certainty and clarity,
furthermore, it promotes caution on the parts of both settlor and the testator,
ensuring they intent to create a trust before the transaction is deemed valid
in law 11. Considering there is a high political, social and economic value
of land and owing to the fact that ‘there are few things more important to
human beings than land’ 12, the statutory conditions are increasingly
necessary, this is because land has a special significance over personal
property, it is very important to clarify the ownership of land.

Because secret
trusts bypass the will of Parliament, it is important to examine the idea
behind upholding their validity because ‘it is only by identifying why we
should recognise secret trusts that we can identify circumstances in which
secret trusts should arise…(and)…if we cannot find a satisfactory
justification for secret trusts then it follows that…we should no longer give effect
to them’ 13.

 

RATIONALES
FOR UPHOLDING THE SECRET TRUST.

The main
disadvantage, in requiring trusts to follow a rigid faithfulness to statutory
formality requirements is that if secret trusts are not upheld, it would lead
to unjust results in a number of cases and the intentions of testators would be
defeated. It would be unfair for trusts to be rigidly upheld following the requirements
set by the Will Act 1873, because some deceased might have intention that do
not adhere to the requirements set up by the Act. So, for this reason, there
have been arguments that have aim to justify the upholding of secret trusts.

The dehors
the will theory is one that has been proposed to justify the existence of the
concept of secret trusts. This theory details secret trusts as an inter vivos express
trust that is created while the testator is alive but the property under trust
does not actually belong to the beneficiary until the testator is dead 14. It
was said in the case of Re Snowden 15 that ‘the whole basis of secret trusts,
as I understand it, is that they operate outside of the will’ 16. Treating secret
as an inter vivos trust would prevent the settlor from settling future assets,
this would be an exodus from the traditional rules that apply to trusts 17. Express
does not come into existence at the time the trust is created, this is because
the settlor has to die before the property is vested. Also, where the property
concerned in the express inter vivos trust is land, it can only be created
lawfully when it has been put into writing 18, and so ‘there is at least one
important context in which a secret trust should be understood as being an
express trust’ 19.

Another justification
for secret trusts that has had a good history, despite the fact they operate in
breach of statutory provision is being ‘used as an engine of fraud’ 20. This theory
argues for the upholding of secret trusts on the grounds that if the intentions
of the testator were to be defeated by rigid insistence by rigid insistence on
the statutory formalities, thereby allowing the intended trustee to keep the
bequeathed property as though it were his own, he would thereby commit fraud
against the testator and the intended beneficiary. The fraud theory shows that
equity will use the mechanisms provided through secret trusts to ensure that
the results intended by the courts will be reached, even though upholding
secret trusts would mean that statutory provisions would be side stepped 21.