High Court Rules On Lucien Freud ‘Secret Trust’ Case

Legal Challenge On Issue By Artist’s Son Fails

03.10.2014

A High Court battle which has seen the son of artist Lucien Freud challenge a secret trust, purportedly created following his death, has put the concept firmly in the spotlight.

Paul Freud, 55, launched the legal challenge regarding a secret trust believed to be worth in the area of £42 million, which was left to a solicitor and one of the artist’s daughters.

In taking the legal action, the artist’s son claimed the part of the will related to the trust would be invalid if specific instructions were not left to the trustees, meaning the contents of the trust would be treated as if the artist had died intestate and been passed to relatives.

However, in a ruling, Deputy Judge Richard Spearman stated that the wording of the will meant that he favoured the trustee’s views of the situation and confirmed they were both entitled to the trust.

Expert Opinion
For the uninitiated, Secret Trusts are often used by the wealthy to sidestep the issues caused by virtue of a Will being a public document. They allow a person to leave assets to individuals without having to name them in their will; historically they were used by aristocrats to provide for illegitimate children and mistresses.

"Secret trusts involve leaving property as a gift to A in a will in the regular way, whilst at the same time giving A secret direction to hold that property on trust for B. Half-secret trusts involve leaving a legacy to A on trust but not stating who the beneficiary is and communicating that to A in a separate document.

"In this case there had been a failure to communicate the instructions to the “trustees” meaning that the “trust” would fail. If the Court had deemed this to be a failed half-secret trust then the property would be held on resulting trust for the residuary beneficiaries. If it was held to be a failed secret trust then it would just be deemed as a gift to A; whom you might argue had never been considered by the testator as someone they wished to benefit in any way.

"The Court, after looking at the construction of the relevant clause and surrounding evidence, held that there was no clear intention to create a trust. This meant that the clause was held to be a gift to the trustees who took the property absolutely.

"One of the key issues was the wording, in that it was inconsistent with creating a trust. In the clause in question the term trustees had not been used, whereas it had elsewhere in the document.

"The wider message that comes out of this case, is that one must be absolutely clear as to their intentions in their Will or face drastic consequences as a result. Instead of this gift going to the intended person it went to entirely different people, one of whom was the solicitor who drew up the Will.

"It is important when making any Will that a testator make their intentions absolutely clear, insist on precise and consistent language being used in the Will and properly communicate with the relevant parties regarding any kind of secret of half-secret trust."
Paula Myers, Partner