“Secret trusts are rarely encountered today, but have a long history.”
So begins the B.C. Court of Appeal decision in Bergler v. Odenthal, 2020 BCCA 175 (CanLII).
There, the deceased died without having made a will. The trial judge found that prior to her death, the deceased told her common-law spouse and other relatives that she wanted her estate to pass to her niece Susanne if and when her common-law spouse became involved in a new relationship.
Upon the deceased’s death, her assets passed to her common-law spouse as jointly held assets. The common-law spouse then entered into a new relationship, and ended up getting married. Susanne sued, claiming that she was entitled to the deceased’s estate pursuant to the terms of the secret trust.
The trial court and Court of Appeal agreed with Susanne’s claim.
The two essential elements of a secret trust are (1) a communication by the deceased person to his or her beneficiary of the terms of the trust (ie, that the “three certainties” are addressed) and (2) an acceptance by that person of the terms of the trust. Acceptance does not have to be express: acquiescence may be sufficient. The evidence was sufficient to establish that the deceased clearly expressed the terms of the trust in her spouse’s presence, and that he agreed to the terms.
As in most “secret trust” cases, the evidence of the terms of the trust was hearsay. However, in Bergler, the trial judge accepted the evidence as being necessary and reliable. In addition, the common-law spouse confirmed that he told the deceased that he would abide by her wishes.
The common-law spouse argued on appeal that the trust would not apply to the jointly held property, as this would pass outside of the deceased’s estate. The Court of Appeal disagreed, finding that, firstly, it was the deceased and the common-law spouse’s understanding that the trust would apply to the jointly held property, and secondly, that as a matter of law, the creation of the secret trust would have severed the joint tenancy. The court relied on a number of cases that held that a finding of a secret trust either impressed certain jointly held assets with the secret trust or severed the joint ownership.
As can be seen from Bergler, a finding of a secret trust can be a very powerful tool, tying up estate assets and even assets passing outside of the estate.
For other blogs on secret trusts, click here or here.
Thank you for reading.