What is a Secret Trust?
I would like to tell you, but it is a secret.
These are trusts, usually set up under a will, where property is left to a person on an undisclosed trust for someone else.
Homer dies and leaves $100,000 cash for his mate Barney, but leaves it to Ned on the understanding that Ned gives Barney $100 per week for the next 100 weeks (so Barney doesn’t waste it all in the first week).
Barney is not recorded as the beneficiary under the will.
Naturally there may be problems with enforcing these trusts as no one may know about them other than the trustee. The beneficiary may realise or find out though but even then they will probably have difficulty proving the trust if there is no written evidence. As such you really must trust your trustee when doing this.
There is also the half secret trust, and that is when the trust is partially disclosed in the will. For example the will might say that Ned is the trustee (using above example) but not who the beneficiary is or the terms of the trust. This might have a higher chance of being enforced as it is evident that there is a trust, but not who for and for how long and how much.
Written by Terryw who is a lawyer at www.StructuringLawyers.com.au