Wills, secrets and an artist’s fortune
During a testator’s lifetime a Will is a private document; the provisions are known only to the testator and those people with whom he chooses to share the Will’s contents. This changes after the testator’s death and once the Will has been admitted to Probate it becomes a public document that is accessible to all and sundry.
Secret trusts
Some testators have no wish for everyone to know who benefits from their estate, or other contents of their Will. This might particularly be the case if the testator has led a more unconventional life.
Secret trusts are legal devices that are sometimes used to preserve privacy on the face of the Will. Instead of giving his estate to A, B and C equally, the testator could give his estate to E and F with no reference to a trust in the Will, but during his lifetime he would communicate to E and F the trusts on which E and F are to hold the estate. This is a fully secret trust. Alternatively, the testator could give his estate to E and F with a declaration in the Will that they are to hold the estate on trust (a half secret trust). The terms of the half secret trust are not set out in the Will but must be communicated to E and F before, or at the same time as the Will is drawn up. This compares to a fully secret trust where communication of the trust provisions can take place at any time while the testator is living.
Lucian Freud’s Will
The difference between fully secret and half secret trusts was the crucial point of a case involving the estate of the painter Lucian Freud. Mr Freud had amassed a fortune of nearly £96 million. He had also led a colourful private life and the judge estimated that he had “at least” 14 children.
Mr Freud had made a Will leaving the residue of his estate to his solicitor and one of his children jointly. The beneficiaries were also the executors of the Will and contended that the Will had created a fully secret trust.
Another of Mr Freud’s children, Paul, had been informed by the executors that he was not a beneficiary of the secret trust. He contended that his father had in fact created a half-secret trust in the Will. If Paul could show that the trust’s provisions had not been communicated to the executors before or at the time of the Will’s execution, the trust would fail and the estate would be distributed under the intestacy rules, meaning that Paul, as one of the children, would receive a share.
The judge considered the natural and ordinary meaning of the words used in the Will, its overall purpose and other provisions, the circumstances under which the Will was made and the application of common sense. He held that Mr Freud’s Will created a fully secret trust. Paul’s claim therefore failed and he lost any possibility of benefitting on his father’s intestacy.
Should I include a secret trust in my Will?
If, for any reason, you do not wish it to be known who benefits from your estate then a secret trust is one of the possibilities that could be explored, although care needs to be taken since the wish to use a secret trust might suggest that a potentially contentious situation exists.
Secret trusts cannot be used to put assets outside of the Inheritance tax net and beneficiaries cannot use them to retain entitlement to welfare benefits if those beneficiaries would become entitled outright to a share of the estate. There are, however, other ways of dealing with these situations and individual circumstances need to be considered in order to plan the most appropriate solution.
For information about estate planning or making a Will, please contact a member of our Private Client team.
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