This is an extract of our Secret Trusts, Testamentary Gifts Not Complying With The Wills Act document, which we sell as part of our Trusts and Equity Notes collection written by the top tier of Oxford students.
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Testamentary gifts not complying with the Wills Act 1837, Secret Trusts Secret Trusts This arises where Settlor makes a gift of property in his will, or leaves an existing will unrevoked, or dies intestate on the strength of an undertaking by the person entitled under his will, or intestacy to hold whatever property he receives on trust for a 3 rd party
What do we do with intended dispositions which fail to comply with the necessary formalities?
In some cases, the testator's intention is clear, and there is no possibility of fraud - there is a real compulsion to enforce the secret trust; question is whether there is a recognised doctrine which allows secret trusts to be enforced in spite of the Wills Act There is an established principle that equity will not allow a statute to be used as an instrument of fraud. In the context of formalities for the creation of a lifetime trust, the better solution was to require the trustee to hold on resulting trust for the settlor. In the case of wills, the settlor cannot "think again" and re-declare the trust properly; with a will he is dead, and a resulting trust for the residuary estate is often what the testator wished most to avoid Reasons for wanting a secret trust:
In past, often to provide for illegitimate child and mother Today usually because testator cannot make up his mind about all details of disposition of estate o By using a secret trust he is able to escape from the policy of the Wills Act and retain for himself a power to make gifts which do not comply with the Act
Seems to be no good reason why he should be able to do so: it is common to make a lifetime settlement and then by will to add further property - the details of the disposition do not in that case appear in the will To create a secret trust the testator will usually arrange to leave a legacy to a trusted friend (often his solicitor), who undertakes to hold it on certain trusts Alternatively the will may give it to him "to be held on such trusts as I have declared to him" In the former case, can the trustee keep it for himself? In the latter case, who can claim: the beneficiary or the estate?
Former case is known as a fully-secret trust, latter is a half-secret trust Other ways in which a trust may be created by will even where will does not spell out exact terms:
Extrinsic evidence may provide details, governed by principles relating to construction of wills o I.e. a will may leave property to "my partners" or "my grandchildren" who can then be subsequently identified o Trust is ordinary testamentary trust, not secret
Incorporation by reference: superficially similar to half-secret trusts
Incorporation by reference "If a testator, in a testamentary paper duly executed, refers to an existing unattested testamentary paper, the instrument so referred to becomes part of his will; in other words it is incorporated into it; but it is clear that, in order that the informal document should be incorporated into the validly executed document, the latter must refer to it as a written document then existing". -Per GorellBarnes J I Bonis Smart Where the doctrine of incorporation applies, the incorporated doctrine is admitted to probate and the advantage of secrecy is lost It is common practice to make a bequest to trustees of an existing settlement to be held by them on trusts of that settlement There is no difficulty in doing so if the existing settlement is incorporated by reference in the will The requirement that only an existing document may be incorporated causes difficulty where a settlement is amended after the date of the will In Re Jones, a testamentary gift which attempted to include future alterations of the settlement was held void even though no alterations were made. Testator was attempting to reserve for himself a power to dispose of his property by future unattested document But this is not the case in every situation where there is a testamentary settlement which includes a power of revocation or amendment; the courts have been willing, where possible, to find a construction which will allow the testamentary gift to be upheld, see Re Schintz' Wills Trust For tax reasons, it is not common for a settlor to reserve a power of revocation or amendment Where the settlement has been altered, there are three possible solutions: i) Testamentary addition is void ii) It takes effect on the settlement in its original form iii) It takes effect on the settlement as amended Testator's intention in most cases is 3 rd choice, but the doctrine of incorporation by reference is clearly incapable of accommodating an amendment made after the date of the will Fully Secret Trusts Informal disclosure of the existence and the terms of the trust Where an absolute gift has taken effect in favour of the donee, it is too late to impose a trust This is so whether the disposition is a lifetime transfer or a gift by will, which takes effect on testator's death In Wallgrave v Tebbs, no secret trust was created where T's intentions were not communicated to the legatees, who took absolutely on the face of the will, and were only found in T's papers after death
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