A secret trust is a type of trust in which property is devised to a person in a will document. The property is to be held by the trustee based on the understanding that they will hold the property and then transfer it to the rightful beneficiary when the person dies. Thus, upon the property owner’s death, the property is supposed to be held by the trustee until it is formally transferred to the beneficiary.
Overall, trusts are financial tools which allow more control over the way property is transferred to another person. In a trust, the trust creator passes the property or funds to someone who will hold the property. This person is called the “trustee.” The trustee will then release and transfer the property to another person (the “beneficiary”) as instructed by the trust creator.
Generally, there are two types of secret trusts: “Fully secret trusts” and “semi-secret trusts”. A fully secret trust is where the existence of a trust is not mentioned at all in the terms of the will documents. The will is completely silent as to the existence of the trust or trust property.
Although there may be instructions contained in the will, if no formal mention is made of a trust, it will typically be labeled as a fully secret trust. Fully secret trusts are often simply known as “secret trusts”.
On the other hand, a “semi-secret trust” is a type of trust where the will mentions a trust, but it does not specifically name any beneficiaries or is unclear on the specific terms of the trust. Thus, it is semi-secret because only part of the trust is written in the will. However, important key provisions are left out.
Both secret and semi-secret trusts are somewhat rare when it comes to will documents. Each state has its own set of laws governing secret and semi-secret trusts. You may need to consult with an attorney for the details of your specific state laws.
Fully secret trusts and semi-secret trusts are generally discouraged under trust laws. Courts would much rather work with clear will documents that clearly and directly describe the existence and details of a trust. Thus, if a will contains a secret or semi-secret trust, the court will usually provide some sort of equitable remedy to resolve any ambiguities or uncertainties regarding the trust.
Secret trusts or semi-secret trusts may result in the following equitable court actions and remedies:
- Secret Trusts: As an equitable remedy, the judge will usually impose the introduction of a “constructive trust”. A constructive trust means that the judge will issue a new trust which more clearly establishes the various parties’ rights.
- This is often the appropriate remedy, since in a secret trust the parties may not be aware of their rights when the trust is not mentioned at all.
- Semi-Secret Trusts: This will usually result in the court issuing what is called a resulting trust. A resulting trust is where the property or funds are returned back to the testator (the person who created the will).
- This is considered an appropriate remedy because in a semi-secret trust, the beneficiaries are not named or identified. Thus, the property owner will simply have the property returned, or, if they are deceased, it will be added to their total estate.
As with any type of trust (and will) arrangement, various disputes and legal issues can be involved. These may have to do with different aspects of the trust or will document as a whole. Some common concerns and conflicts related to these types of trusts may include:
- Disputes Over the Property: There can often be disputes over the property involved. This can involve disputes such as those related to a specific item, or those related to the amount of money supposedly held in the trust. Oftentimes, there can be uncertainties since the trust is not referred to or described in the will document.
- Disputes Over Beneficiaries: A common trust and will dispute is where other people contest the rights of others to receive property as a beneficiary. That is, there may be disputes as to which persons are entitled to receive property.
- Again, such conflicts could have been avoided if a more clear will or trust document existed to provide instructions regarding the names and identities of beneficiaries.
Secret and semi-secret trusts are discouraged,because many parties may lose their rights to property items. If you are facing a dispute over secret or semi-secret trusts, you should contact an attorney in your area right away. It is especially important to do so if you are anticipating a lawsuit or legal action over the dispute.
Also, secret trusts can be avoided in the first place through accurate and detailed drafting of the trust or will documents. A wills, trusts, and estates lawyer can help you draft your will documents in such a way that they are valid under state laws, and secret trusts are avoided altogether.