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 a trustee based on the understanding that they will hold the property and then transfer it to the rightful beneficiary. Thus, upon the property owner’s death, the property is supposed to be held by the trustee until it is transferred to the beneficiary.
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 will documents. The will is completely silent as to the existence of a trust. Although there may be instructions contained in the will, if no formal mention is made of a trust, it will be labeled as a fully secret trust. Fully secret trusts are simply known as secret trusts.
What is a semi-secret trust?
On the other hand, a “semi-secret trust” is a trust wherein 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 but important key provisions are left out.
Both secret and semi-secret trusts are somewhat rare. However, each state has its own set of laws governing secret trusts. Consult with an attorney for the details of your specific state laws.
What are the Effects of Secret and Semi-Secret Trusts?
Fully secret trusts and semi-secret trusts are discouraged under trust laws. Courts would much rather work with clear will documents that clearly 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 the ambiguities regarding the trust.
Secret trusts or semi-secret trusts will result in the following equitable court actions:
- Secret Trusts: As an equitable remedy, the judge will usually impose a constructive trust. A constructive trust means that the judge will issue a new trust which plainly and clearly establishes the various parties’ rights. This is the appropriate remedy, since in a secret trust the parties may not be aware of their rights because the trust is not mentioned at all
- Semi-Secret Trusts: This will usually result in the court issuing a resulting trust. A resulting trust is where the property is 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. Thus, the property owner will simply have the property returned, or, if they are deceased, it will be added to their estate.
Do I need a Lawyer for Secret Trusts or Semi-Secret Trusts?
Secret and semi-secret trusts are discouraged precisely 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 right away. It is especially important to do so if you are anticipating a lawsuit over the dispute. Also, secret trusts can be avoided in the first place through accurate and detailed drafting of the documents. A wills or estate lawyer can help you draft your will documents in such a way that secret trusts are avoided altogether.