Lucian Freud: disputed wills and secret trusts

Lucian Freud: disputed wills and secret trusts

On 30th July this year, Judgment was handed down in the case of Re The Estate of Lucian Michael Freud. The case not only concerned the legacy of a hugely influential painter but it also followed the landmark decision in Marley v Rawlings which I commented upon in February (https://www.michelmores.com/appious-probate-insight/supreme-courts-decision-rectify-will-may-lead-increase-legacy-disputes/).

The Facts 

When the internationally-renowned artist Lucian Freud died in July 2011 he left not only a significant collection of impressive paintings but a personal estate worth £96 million.

During his life, Freud was an unconventional figure and lived a very full private life, he had at least 14 children by several partners. On Freud’s death it transpired that he had left his entire residue estate jointly to his former Solicitor Diana Rawstron and one of his daughters Rose Pearce, subject to a secret promise that they would distribute it to a number of undisclosed recipients. The Will, which had been drafted in 2006, also appointed both women as sole executors.

Following payment of inheritance tax and specific legacies, the residuary estate was £42 million. The sixth paragraph of Freud’s Will left the residue as follows:

‘I give all the reside of my estate (out of which shall be paid my funeral and testamentary expenses and my debts) and any property over which I have a general power of appointment to the said Diana Mary Rawstron and the said Rose Pearce jointly’.

Whilst this clause suggests an absolute gift of the residuary estate to Diana and Rose, it was later revealed that they had been instructed by Freud to distribute it to a number of specified beneficiaries, the identities of whom were to remain anonymous.

The case arose when one of Freud’s illegitimate sons, Paul McAdam Freud, sought to challenge the construction of the Will. He argued that the clause should not be interpreted as giving the residuary estate to Diana and Rose for their absolute benefit, but to hold on trust. Paul asserted that the clause imposed a half-secret trust over the residue. Diana and Rose disputed Paul’s interpretation and instead issued a claim seeking a declaration that they were absolutely entitled to Lucian Freud’s residuary estate (albeit that they had secretly agreed with Freud to hold it on trust).

It therefore fell to the Court to interpret Lucian Freud’s Will to determine whether the trust created over the residuary estate was in fact a fully secret trust (whose existence would not be made public at all) or half secret trust (whose existence is known but whose details are not).

Paul Freud argued that the trust imposed on the residuary estate could at best, have been a half secret trust and that in any event the requirements for the creation of such a trust had not been met. If successful in his argument, the net result would have enabled Paul to claim a share of the residue under the Intestacy Rules. Diana and Rose insisted that the gift of the residuary estate to them was absolute, as indicated by the wording of the Will, and thus Paul’s claim failed at the first hurdle. They also told the Court that even if a half-secret trust existed, Lucien Freud had told them all about his wishes before he executed the Will, and so the trust would be valid.

Legal Analysis 

Deputy Judge Spearman re-stated the principles laid down in Marley v Rawlings, that a will should be interpreted in the same manner as a contract, looking at the intention of the testator, the natural meaning of the relevant words and the overall purpose of the will. The court was to have regard to common sense in making its decision and should ignore subjective evidence of the parties’ intentions.

The Judge carefully applied the Marley v Rawlings principles to this case, considering both the background facts and the wording of the Will itself in making his decision. Detailed analysis of the difference between fully secret and half secret trusts was also carried out.

Ultimately, the Court found in favour of Diana and Rose, declaring that they were absolute beneficiaries of the gift. The Judge relied on the ‘natural and ordinary meaning of the words used in Clause 6 of the Will’ as well as its other provisions and overall purpose. It was clear that a key factor in the decision was that the 2006 Will revoked an earlier Will that contained a differently worded clause 6 which was plainly intended to create a half-secret trust. This, the Judge said showed that Lucian Freud did not intend to create a half-secret trust by clause 6 of the new Will.

Summary

While the beneficiaries of Freud’s £42 million estate remain unknown to us, the application of the Marling v Rawlings principles which are at the centre of this case provides a helpful indicator of the way future wills will be read and considered. The case demonstrates once again the importance of a well-drafted Will in order to avoid litigation.

Having been excluded from benefitting under his father’s Will, Paul Freud may try and argue that, as a child of Freud, he is entitled to financial provision under the Inheritance (Provision for Family and Dependants) Act 1975. However, as an “adult child”, Paul’s claim will not be without its difficulties.

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