If you read any blog about estate planning, one of the first themes you may notice is the importance of creating a will in order to ensure that your wishes are carried out upon your death. Of course, not everyone gets around to creating a will, leaving the estate open to litigation from possible beneficiaries. Sometimes someone fails to make a will but still shares their wishes with someone else who stands to benefit. These are known as secret trusts. A recent decision looks at the creation of such a trust as well as how the trustee handled the instructions and whether he followed the wishes of the testator.
The creation of the secret trust
The testator died on April 25, 2013 following a short battle with pancreatic cancer. She received the diagnosis only two months before her death. She did not have a will, but she did leave instructions with her common law spouse (“the spouse”). She instructed her spouse that when she died, she wanted her assets to be given to her niece.
Following the death of the testator, the spouse did not pass her assets to the niece. Instead, he created a will where he divided the residue of his estate in to ten shares, leaving three of those shares to the niece. He figured the testator’s share of the estate equaled 30%, or $130,000. He would later tell the court that his intention in doing this was to realize the wishes of the testator.
A beneficiary objects
The niece’s position was that the testator wished for her assets to go to the niece immediately after her death since she had no home or assets and was planning to return to school. The niece argued that the testator had created a secret trust and that the spouse was in breach of those instructions.
Was a secret trust created?
The first thing the court looked at was whether a secret trust had been created. The court noted the essential elements of a secret trust:
- The donor intends for a secret trust to be created
- The intention is communicated
- The trustee accepts this intended wish of the testator
The niece testified that the spouse told her and her sister about the secret trust. Her sister also recalled a conversation where the testator asked if she had any issues with the niece receiving her entire estate.
The spouse also admitted that he and the testator had discussed the estate, and that the testator wished for it to be transferred to the niece. He also told her he would abide by those wishes.
In this case, the court was satisfied that the elements of a secret trust had been established. After reviewing the estate, the court ordered the trustee’s assets to be transferred to the niece as well as $22,200 of the testator that the spouse had spent.
Contact Derfel Estate Lawto speak with an estates lawyer who will guide you through your trust dispute and work to achieve the best possible resolution to your trust matter. Call us at 1-844-2-DERFEL or contact us online to schedule a consultation.