What is a Secret Trust?
A secret trust is a trust which arises when property is left to a person under a will on the understanding that they will hold the property as trustee for the benefit of beneficiaries who are not named in the will. In simple terms, this is when the testator wants to keep the identity of the recipient of the property a secret.
Purpose?
Usually, a will becomes a public document once probate is granted, and it can be inspected by paying appropriate fees. There are many other types of recipients, for an instance illegitimate children and mistresses could be one of those people to whom testators may have personal reasons for quietly bequeathing.
Is it recognized in Malaysia?
Yes, it is!The Malaysian Courts have expressly recognised the doctrine of secret trusts in the Federal Court case of Chin Jhin Thien & Anor v Chin Huat Yean @ Chin Chun Yean & Anor [2020] 1 LNS 662.
It was held in this case that the law of secret trust is not contradictory to the Malaysian Wills Act 1959, nor is it against public policy. The Federal Court also held that the concept of secret trust is ‘consistent with the fundamental human right of privacy’ and emphasizes the testamentary freedom afforded to testators.
As the law of trusts in Malaysia is underdeveloped, we very much rely on the English Law. Therefore, the general rules that apply to trusts in English law is also applied in Malaysian law in relation to trusts and wills.
Types
There are two types of secret trust.
Fully secret trust
- This is when the testator appears to hand over a property to the legatee, but secretly asks him to hold the property for the benefit of another person. The existence of the trust is only revealed by extrinsic evidence.
- As per the case of Ottaway v Norman [1972] 2 WLR 50 the testator needs to:
- have the intention for the named beneficiary to hold the property on trust for another person;
- communicate this intention to the named beneficiary that he intends for the property to go to another person; and
- has willing acceptance of the named beneficiary to carry out this task.
Note that this must be done before the testator’s death.
Half Secret Trust
- Here, the requirements of intention and acceptance for half secret trusts are the same as fully secret trusts. The key difference is when communicating the testator’s intention, it must be done before or at the time of the execution of the will.
- Communication made after the execution of the will, although before the death of the testator is makes it invalid.
