Understanding Secret Will Trusts and when they can be useful

File picture, dated 17/06/2002, A painting, entitled 'Self Portrait, Reflection', by Lucien Freud.  PRESS ASSOCIATION Photo. Issue date: Thursday July 21, 2011. The renowned British artist has died, aged 88. See PA story DEATH Freud. Picture credit should read: John Stillwell/PA Wire
File picture, dated 17/06/2002, A painting, entitled 'Self Portrait, Reflection', by Lucien Freud. PRESS ASSOCIATION Photo. Issue date: Thursday July 21, 2011. The renowned British artist has died, aged 88. See PA story DEATH Freud. Picture credit should read: John Stillwell/PA Wire

Some of you may know of the well known 20th Century artist Lucian Freud. For those of you who do not, his life seems to have been as colourful in reality as it was on canvas, and the rather colourful goings on seem to have continued after his death.

Lucian Freud was the grandson of Sigmund Freud, who has been referred to as the founder of psychoanalysis and known for his rather controversial views. He was also the elder brother of the writer and politician Clement Freud.

He moved to the UK from Germany in 1933 and became a British subject in 1939. He was known for his still life paintings mainly, and for his style being in keeping with the surrealist and expressionist movements.

With titles for his work such as ‘Man with Thistle’, ‘Girl with a white dog’ and ‘Naked Man with Rat’, this provides an illustration of the rather surreal juxtapositions of still life and animals or other objects which you could come to expect with his work.

Freud was not only known for his unusual painting subjects, he was also known for having what most may find a rather unconventional lifestyle.

He is known to have fathered fourteen children, two to his first marriage, and 12 to his various mistresses, although there have been rumours that he fathered many more.

In view of his wealth and rather complicated personal life one can only assume that Freud thought it quite important to take great care in organising his Will and what would happen to his rather substantial estate on his death.

It is thought that his estate amounted to in the region of £96 million. After the payment of inheritance tax and a number of specific cash gifts in his Will the balance was left to a ‘Secret Will Trust’.

A Secret Will Trust is created when the person who makes a Will (the Testator) leaves his estate (or a part of his estate) in his Will to someone (whom I will refer to as the Recipient) and then communicates to the Recipient his express wishes as to who is to benefit and in what share.

So from the face of the Will it may appear that the Recipient is to benefit, but who actually benefits is a closely kept secret between the Testator and the Recipient.

The Secret Will Trust is only valid if the Testator tells the Recipient who is to benefit during his lifetime and there is evidence available to support this happening.

Freud did precisely this. He left the biggest proportion of his estate to his eldest daughter Rose Pearce and his solicitor Diana Rawstron. They then subsequently disclosed that they were to hold the remainder of the estate under the terms of a Secret Will Trust for others.

Given the size of the estate and the dynamics in Freud’s personal life perhaps it is not so surprising that a claim then ensued. One of Freud’s sons Paul McAdam Freud claimed that the Will was not valid.

Fortunately for the Executors of Freud’s estate Judge Richard Spearman QC upheld the validity of the Will and the Secret Will Trust.

If McAdam had been successful then the secret part of the Will would have failed and the majority of the estate would have been divided under the Intestacy Rules equally between Freud’s children, including McAdam.

Given the uncertainties about the number of children Freud could have potentially fathered and possible paternity issues, if the Will had failed then this could have created further problems for the estate.

In practise we rarely come across Secret Will Trusts, and in most circumstances I would advise against it.

They inevitably cause suspicion, animosity and upset, which is something that most Testators would want to avoid. They also carry the risk of legal challenge.

Not only could a beneficiary claim the Will was not valid, as McAdam did, they may also claim that reasonable financial provision had not been made for them under the Inheritance (Provision for Family & Dependents) Act 1975. That said, with the complexities of some family dynamics the Secret Will Trust may be a suitable solution for some.

l Katie Swift is a solicitor at Wilkinson Woodward Bearders and head of the probate department. She can be contacted on 01422 339600.