HAS FREUD GIVEN THE COURTS THE SLIP?

HAS FREUD GIVEN THE COURTS THE SLIP?
Legal Update
Author: Amantha Seneviratne
Date: October 2014
The High Court has recently delivered its judgment on a dispute over the £42 million
estate of Lucian Freud, the internationally recognised artist and grandson of
Sigmund Freud. He led a rather controversial life and fathered 14 known children,
many illegitimately. The dispute was over the interpretation of the will and the validity
of a secret trust that had been created under it (Rawstron and another v Freud
(2014)).
The Law
As wills become public documents once a Grant of Probate has been obtained,
secret trusts are often used by those who have illegitimate children, mistresses or a
private life that they do not wish to be known by others.
There are two types of secret trust:
1. Half Secret Trust – where it is evident from the will that a trust exists:
e.g. “£100 to my sister, Amy, to hold on trust for the purposes of which I have
already explained to her”.
2. Fully Secret Trust – where it appears that an outright gift has been made:
e.g. “£100 to my sister Amy”.
For half secret trusts to be valid, the terms of the trust must be communicated to the
trustee before the will is signed. If this condition is not met, then the trustee must
hold the funds for the residuary beneficiaries of the estate. In contrast, for fully secret
trusts to be valid, the terms of the trust simply need to be communicated to the
trustee at some point during the testator’s lifetime.
The Dispute
The will appointed Diana Rawstron (Freud’s solicitor) and Rose Pearce (Freud’s
daughter) as the executors of his estate. He defined “my Trustees” as his executors
in relation to dealing with his copyrights and chattels, however the clause dealing
with his residuary estate referred to them by name rather than “my Trustees”.
Paul Freud, Freud’s son, alleged that the gift of his father’s residuary estate made to
his father’s solicitor and daughter was on a half secret trust rather than a fully secret
trust and that the terms of the trust were not communicated correctly, thus causing
the trust to fail and an intestacy to arise. Were this true, he along with his other
siblings would have been entitled to a share in their father’s estate.
The Decision
The court accepted that Diana Rawstron and Rose Pearce were entitled to the
money outright and that a fully secret trust was created validly and dismissed Paul
Freud’s arguments.
The judge noted that although the Trustees were referred to by name in the
residuary gift clause indicating that the testator intended to benefit them personally
rather than as trustees, it is accepted practice for solicitors to be appointed as
trustees in trusts.
Importantly, Freud had made a will two years before his last will (which was prepared
by the same solicitor, Mrs Rawstron), in which he had appointed the same executors
and trustees. The difference between the two was that the residue was clearly left on
a half secret trust, therefore it was sensible to conclude that he wanted to make a
fully secret trust in his last will.
The Significance
This case confirms that secret trusts are still a legitimate way of providing for
individuals who want to keep their wishes on death confidential. No doubt Paul Freud
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will now attempt to bring a claim under the Inheritance (Provision for Family and
Dependants) Act 1975, as he was not afforded any of his father’s wealth whilst
growing up as child. It is therefore important to note that although secret trusts are
still valid and can operate privately, they may give rise to disputes between family
members on death.
More information
Amantha Seneviratne
+44 (0)1483 252600
amantha.seneviratne@charlesrussell.co.uk
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www.charlesrussell.co.uk
Charles Russell LLP is a limited liability partnership registered in England and Wales, registered number OC311850, and is au thorised and regulated by the
Solicitors Regulation Authority . Charles Russell is also licensed by the Qatar Financial Centre Authority in respect of its branch of f ice in Doha. Any ref erence to a
partner in relation to Charles Russell LLP is to a member of Charles Russell or an employ ee with equiv alent standing and qualif ications. A list of members and of
non-members who are described as partners, is av ailable f or inspection at the registered of f ice, 5 Fleet Place, London EC4M 7RD.