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 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. 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 This inf ormation has been prepared by Charles Russell LLP as a general guide only and does not constitute adv ice on any specif ic matter. We recommend that y ou seek prof essional adv ice bef ore taking action. No liability can be accepted by us f or any action taken or not taken as a result of this inf ormation. Charles Russell LLP is not authorised under the Financial Serv ices and Markets Act 2000 but we are able in certain circumstances to of f er a limited range of inv estment serv ices to clients because we are members of the Law Society . We can prov ide these inv estment serv ices if they are an incidental part of the prof essional serv ices we hav e been engaged to prov ide. 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.