Secret Trust: The Case Study Of Will

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Category Law
Subcategory Laws & Regulations
Topic Secret Trusts

Words 1598
Pages 4

This memorandum addresses the validity of Rosetta’s homemade will, additionally it will also address whether the gifts and the trusts that were made in the result of this home-made will are valid and to what extent. Further material has been provided to determine the scope of the instructions given that will be able to give the most accurate advice and guidance.

It is on the understanding that Rosetta Stanley would like to revoke her former Will and Testament and make alterations where both her son and daughter are her executors and trustees. Where £5,000 is to be left to the son; Thomas Stanley. Working through this chronologically, the £5,000 can be seen to be a form of a secret trust where estate is left to a trustee in absolute, however, the testator intends for the estate to be held on trust for the benefit of another. It could be considered that the Will would then be invalid due to it not being compatible with the requirements that are set out in the Wills Act [1] however if the ‘dehors’ theory [2] is applied then the secret trust could be considered as more of a personal obligation on behalf of the legatee which has been agreed upon, therefore it could be argued that the gift is still valid as secret trusts operate outside the Will and is considered more inter vivos. Furthermore, it is understood that the money is to be held on trust which is for the maintenance of Rosetta Stanleys pet, it can therefore be argued that there is not necessary a need for there to be a human beneficiary as mentioned in the case of Re Endacott [3] that maintenance for a pet is an exception to needing a human beneficiary. [1: Wills Act 1837] [2: Re Snowden 1979 ALL ER 172] [3: Re Endacott 1959 EWCA]

The next part of the Will to look at would be the £50,000 which is to be left and held on a trust by Thomas Stanley, this can be understood to be a half-secret trust which is where there is estate that is left to a beneficiary but is held on a trust where terms have not been mentioned within the Will be have been communicated separately and agreed upon by the testator and beneficiary. Reiterating from earlier, it is important to view the half-secret trust as operating outside the Will, this is as the gift could then be deemed as valid as it is not caught by the requirements noted in the Wills Act [4]. There are issues however, that could arise when dealing with secret trusts as the gift within the Will could be deemed invalid as the intended beneficiary has not been mentioned, furthermore this could potentially be fraud as the trustee could potentially disregard the instructions left by the testator as ‘the jurisdiction [on secret trusts] which is involved here is founded on personal fraud’ [5]. Additionally, it should be noted that the half-secret trust is held for Rosettas niece Esther Moore who is terminally ill, this could be also proven to be problematic if the beneficiary predeceases the testator the gift could potentially lapse and return to the residual estate. Despite this, it can also be disputed that the testators estate should be paid to the deceased beneficiaries estate as a trust has been created in the lifetime of the testator according to the case of Re Gardner [6]. [4: N1] [5: McCormick v Grogan 1869 UKHL 1] [6: Re Gardner 1923 2 Ch 230]

The next part of the will to look at is the £100,000 that is left to daughter Trudy Stanley which is to be held on trust for a charitable private fee paying school within Hatfield. To assess the validity of this section of the Will then it is vital to look at what a charity is as well as the requirements of charities. A legal definition can be found in the Charities Act [7] which is “an institution established for charitable purposes only” [8], furthermore it can be described as having a “public purpose” [9] too. Moreover, you need to assess all the words used by the testator in order to determine the true nature of the gift according to Lord Lindley [10] this can also be established when identifying whether the three certainties are present as they are vital in order for it to be perceived as a charitable trust. This principle was formed in the case of Knight v Knight [11] where it was established that there needs to certainty as to the intention , this means that there must be a clear intention to create a trust and it is apparent due to the wording used by Rosetta that the intention was for her son and daughter to hold the estate as a trust, the next requirement is to look at the certainty as to the subject matter, therefore there must be certainty as to which property is and is not covered by the trust with regards to this there seems to be no issue as the estate can be ascertained as per lord Eldon [12]. Additionally, the subject matter is clearly identified within the Will so there are no disputes as to what the subject matter is. The last requirement is the certainty as to the objects which refers to the beneficiaries of the trust are certain, and since there are trustees mentioned in the Will there is not issue with this this. Therefore, the gift left to the charitable school can be considered as valid. [7: Charities Act 2011] [8: ibid ] [9: Gilmour v Coats 1949 AC 426] [10: Re Hamilton 1895 Ch 308] [11: Knight v Knight 1840 Beav 148] [12: Morice v The Bishop of Durham 1805 32 ER 1009]

The next problem to confront would be to the estate which is £40,000 which is left to two charitable foundations which is to be split in equal shares. Looking it this head on there would not be an issue with this, however, it is noted that one of the charities; the Hamster trust is no longer a registered charity and the other charity; the Hedgehog Society has been taken over by another registered charity called the Hertfordshire Animal Preservation Trust. This could be challenging, due to one charity no longer being registered, this could render the gift as void in the Will, however since the initial charity no longer exists it could be possible to surplus funds to a similar charity to the Hamster Trust and apply the cy-pres doctrine this allows some terms within the Will to be changed to and go to a charity that matches closely to the original intention of the testator which can prevent the trust from failing.

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With regards to the other charity the Hedgehog Society, its assets and liabilities have been taken over which could be troublesome, however according to Re Faraker [13] it is possible for a charity which has taken over another charities assets and liabilities could still be successful as you would consider that the “charitable end is well established and the means are only machinery, and no alteration of the machinery can destroy the charitable trust for the benefit of which the machinery is provided.” [14] These issues can be overcome if we look at the intention of the gift and was it for the charitable purpose or whether it was specifically for that charity chosen in which case the gift would fail [15] [13: Re Faraker 1911 ER REP 488] [14: ibid] [15: The Construction of Charitable Gifts’ (1974) 38 Conv (NS) ]

The final issue to assess would be the sum of £200,000 which is to be loaned to an old employer [Grendell Optics] and what would happen to that loan if they went into liquidation before the debts were paid. To resolve this issue, quistclose would need to be focused on which refers to when a property has been transferred for a specific purpose and then fails, the purpose of the loan is to pay off the financial difficulties which the company is experiencing which was first recognized in Barclays v Quistclose [16]. If this were to happen then it can be explored that since the purpose of the loan was incapable of being fulfilled then the testator may be able to claim proprietary interest on the money which allows the lender to escape the consequences of the borrower becoming insolvent. [17] [16: Barclays Bank Ltd v Quistclose Investments Ltd 1970 AC 567] [17: ibid]

To conclude, it can be argued in certain areas that the home-made Will could potentially be invalid this is in respects of with the secret trusts, additionally with regards to the charity no longer being a registered charity. The main issue that could potentially render this Will invalid could be that the requirements of the Will set out in the Wills Act [18] has not been met since there are not enough witnesses to see the signing of the Will, however there are exceptions which has been mentioned throughout this memorandum that does show how the will could still yet be successful. [18: N1]