Shhhhh! It’s a Secret Trust!
This June, in the case of Bergler v. Odenthal, 2020 BCCA 175, British Columbia’s highest court upheld the finding that Bernd Odenthal’s inheritance of his deceased common-law spouse’s estate was subject to a secret trust created by her deathbed wishes. The deceased did not write a will prior to her death so, according to British Columbia’s rules of intestacy, her estate would normally go to her spouse. However, while in hospital, she asked her spouse, Mr. Odenthal, to give her entire estate to her niece once he began dating a new partner.
Secret trusts are rarely encountered, but they have a long history in common law traditions. Secret Trusts have two essential features:
- A communication by the deceased person to a beneficiary or intestate heir that they will hold the property in trust for the stated person; and
- An acceptance by that person of the request to hold the property in trust.
The Court of Appeal reaffirmed that acceptance of the trust obligation can be “spelled out of the silence” of the trustee. Meaning that if a trustee does not want to fulfill a trust obligation, they had better say no at the time the request is made to hold property in trust.
The Court of Appeal ultimately held that there was a valid secret trust created by the deceased’s request, that put Mr. Odenthal under an obligation to transfer the deceased’s estate to her niece. This included both the property that transferred to Mr. Odenthal through BC’s intestacy rules, as well as the deceased’s share of property that they owned as joint tenants and that transferred to Mr. Odenthal through the right of survivorship. The Court of Appeal held that the creation of the secret trust severed the joint tenancy, so the right of survivorship would no longer apply.
Secret trusts may be a fascinating for lawyers, but as with most things that are interesting for lawyers, they can quickly become expensive for clients. This is because they are fodder for litigation and can be both difficult and expensive to prove. You, and your beneficiaries, would be far better served, by speaking to a lawyer about estate planning and by putting your wishes into a will. However, if you do find yourself in a situation where either you believe you are the beneficiary of a secret trust, or you are being accused of holding property in trust for someone, our litigators would be happy to help.
July 23, 2020