The British Columbia Court of Appeal has recently confirmed that the principle of secret trusts is alive and well – at least in British Columbia. In Bergler v. Odenthal, 2020 BCCA 175, the Court of Appeal upheld a trial judge’s decision, finding that through death bed discussions the deceased and her common-law spouse had created a secret trust over the assets that would form the deceased’s estate. The Court further found that the creation of the secret trust acted to sever a joint tenancy in real property held by the deceased and her spouse.
The deceased died without a will and, but for the secret trust, her estate would have passed to her common-law spouse. Generally, in estates law, a written will is required in order for non-intestate successors to lay claim to an estate. However, the Court found that in the days leading up to her death, the deceased had advised her spouse that she wanted her estate to go to her niece and that he was to transfer her estate to the niece’s family when he entered into a relationship with a new partner. The Court further found that the deceased’s spouse had told her that he would abide by her wishes. As a result of these discussions, the Court found that a secret trust had arisen requiring the deceased’s spouse to hold the deceased’s assets in trust for the deceased’s niece.
The Court held that there are two essential features of a secret trust:
- Communication by the deceased person to the beneficiary of his or her estate of the terms of the trust; and
- An acceptance by the beneficiary of the request that they hold the property in trust for the stated person.
The Court also confirmed that a secret trust must still meet the usual trust requirements of certainty of intention, objects and subject matter.
Of note, with respect to a beneficiary’s acceptance of the trust requirements, the Court found that the acceptance does not have to be expressly given. Rather, the Court held that once the deceased’s communication of the trust obligations was established, acceptance by the beneficiary could be proved out of his or her silence. It can be assumed that any person having received a request of this nature would be bound to say something if they rejected the obligation. The Court also found that a deceased was not require to actually use the word “trust” in order for a secret trust to be formed.
The Court further made findings with respect to how a joint tenancy in real property can be severed. One of the assets at issue in the case was a property held in joint tenancy by the deceased and her spouse. The deceased’s spouse argued that, as a result of the joint tenancy, the property passed to him by right of survivorship and did not form part of the deceased’s estate. However, the Court found that by its creation, the secret trust severed the joint tenancy at the time the trust was created, which was when the deceased was still alive, and that the deceased’s interest in the property was accordingly subject to the trust.
While it remains to be seen whether courts in other provinces will follow the case, the decision, in Bergler v. Odenthal, is a cautionary note that individuals should be careful when approaching death bed requests. If they do not intend to comply with the request, they should say, “No”, clearly and unambiguously. The case also has the potential to have repercussions beyond estate law and may play a role in the areas of trust and property law.