secret trust

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A trust whose existence is not made public, thereby giving the impression that the trust property is in fact an outright gift to its recipient, the secret trustee. For example, A makes a gift in his will to B on the secret understanding between them that B will hold the property on trust for C. Secret trusts, while normally associated with a will, have been created upon intestacy where the settlor has made an arrangement with an intestate successor (Sellack v Harris (1708) 2 Eq Ca Ab 46). Doctrinal difficulties regarding the recognition of secret trusts have arisen because of their apparent failure to comply with the requirements of the Wills Act 1837 (s 9). This requires all testamentary dispositions to be in writing, signed by the testator. However, the modern theory of secret trusts suggests that secret trusts are created * inter vivos, hence the Wills Act does not apply. Further difficulties arise in connection with the proper classification of secret trusts. It has not yet been conclusively determined whether secret trusts are express trusts or constructive trusts. This has a bearing on what formalities should apply to the creation of such trusts, particularly the application of section 53(1)(b) of the Law of Property Act 1925 where the trust property is land. The leading case on fully secret trusts is Ottoway v Norman [1972] Ch 698.

Subjects: Law.

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