Trusts and the Secret Trust

In trusts, there is the settlor who owns the property, the trustee who receives control of the settlor’s property and holds it in trust for the benefit of the beneficiary, for a specified purpose (e.g., education and welfare of the beneficiary).  The settlor and trustee can be one and the same person. The formalities for setting up a trust are not as simple as a will, so a person interested in setting up a trust will do well to consult with a professional. A poorly constructed trust instrument would fail because the wording used leaves the trustees (or the courts where the trustees fail) with uncertainties.  There is a ‘hallowed’ or ‘cardinal’ principle that a trust must be defined with sufficient certainty to enable the trustees (or the court) to execute the trust according to the settlor’s (your) intention. The issue of certainty has four prongs: conceptual certainty, evidential certainty, ascertainability and administrative workability. Conceptual certainty: When the beneficiaries of your trust are named individuals, e.g., my son Andrew, my first grandchild, etc., there will usually be no problem with conceptual certainty and therefore no arguments arise.  However, to give a gift to a class of beneficiaries such as your ‘friends’ or ‘relatives’, or ‘all good citizens’ of Lagos State, there must be sufficient context, to enable the trustee to ascertain with certainty how the categories ‘friends’ or ‘relatives’ or ‘all good citizens’ are to be defined. Evidential certainty: This is the extent to which the evidence available enables the trustee to identify a person as being a member of the class of beneficiaries. If the trust is set up for relations or descendants of a person, the relations trying to benefit from the trust must have some evidence to show that they are indeed beneficiaries. Evidence could be in the form of birth certificates, oral evidence of family history, etc. Ascertainability: This is simply the extent to which the whereabouts or continued existence of identified or potential beneficiaries can be ascertained. Keeping with the example of a trust for relations of the settlor, depending on how the trust is set up, would we be looking for all relations or would 50 qualifying relations be sufficient number to distribute the trust?  What about the relation who existed at some point, but his whereabouts and whether he left any descendants is unknown? Administrative workability: This is the extent to which it is practicable for trustees to discharge their duties towards the beneficiaries.  Suppose we agree that “all good citizens” of Lagos State referred to all residents of Lagos State who had paid their taxes every year for five years.  It would be possible to identify all such persons, but the question would be whether the settlor has set up a mission impossible for the trustees because the trust is administratively unworkable. The above is generally how express trusts work. A secret trust on the other hand is a device that was traditionally used by a testator (a person making a will) to provide for their mistresses and children born out of wedlock. Essentially, a secret trust is set up in the will, and the trustee appears as a beneficiary in the will. While the trustee is named as a beneficiary in the will, the gift is not for the trustee’s benefit. The trustee holds the gift for the true, secret beneficiary, as already discussed between the testator and the trustee. So, in the will, all anybody knows on face value is that the testator has given his house at Fox Lane to Mr. Friend. The testator must have had a prior discussion with Mr. Friend, that the house at Fox Lane is to be transferred to Lady Lover and her son. And Mr. Friend must have agreed to carry out the testator’s wishes as to the property on Fox Lane. As you can imagine, there can be problems with secret trusts. Where the secret beneficiary is unaware of the arrangement, the trustee may take the gift and never transfer it to the secret beneficiary. The arrangement of a secret trust takes effect outside of the will. It means that whoever is being appointed as the trustee must be a person of integrity who will not scheme the secret beneficiaries out of their gift. Because, as already explained, the gift is given to the trustee. The will only recognises the trustee who is a beneficiary in the will. A secret trust can be a half secret trust or a full secret trust. In a half secret trust, the gift will make reference to the fact that it is given to the beneficiary for a purpose already discussed and agreed upon (of course, the purpose is not revealed in the will). A full secret trust does not make any such reference.  The gifting to the trustee looks no different than any other gift in the will. A half secret trust is probably the safer option to protect the interest of the secret beneficiary, but whether a testator chooses a half or full secret trust will depend on the circumstances that necessitate the secret trust in the first place.]]>