Charitable Trusts

What is the legal definitions for a charitable trust

- historically was decided through common law until the Charities Act 2006 codified these common law ideas

- 2006 act was then consolidated in Charities Act 2011 sections 1 and 2

s.1, "institution established for charitable purpose only"

s.2, purpose must fall within s.3(1) and be for public benefit

What are examples of charitable purposes (s.3(1))

CA 2011

a) relief of poverty

b) advancement of education

c) advancement of religion

e) community development

f) arts, culture and heritage

h) human rights and racial harmony

What are the historical routes for the charitable purposes in s.3(1)

Charitable Uses Act 1601

- preamble listed the purposes that judiciary then used to determine charitable status

- key influence in judicial development

- charity law used it as a base for 300 years

- "foundation for extension by analogy" Morice v Bishop of Durham (1804)

Four Heads of Charity by Lord Mcnaghten [1891]

i) relief of poverty

ii) advancement of education

iii) advancement of religion

iv) other purposes beneficial to the community by extension of analogy

Scottish Burial Reform (1968) - trust for maintenance of church property deemed valid under this

-public benefit presumed for first three heads, but could be rebutted

Gilmour v Coats (1949)

What are the benefits to a Charitable trust

• time limitations

• tax advantages

• advice

• certainty

Time Limitations

Private trusts can’t go on forever e.g, usually limited to 125 years

• PAA 2009

Charitable trusts are exempt from perpetuity so can exist forever in theory

• longest recorded Kings School 1,400 years

Tax Advantages

For Charities

• relieved from income tax and capital gains tax

• though some have questioned if they should be liable for large amounts of tax

Donors

• testamentary (giving to charity can reduce inheritance tax

• inter vivos - more than gift e.g. gift aid

Advice

Charitable trustees can be given free advice by the Charity Commission

• individualised advice (CA 2011 s.110)

• this is a public funded commission at the expense of the state

Certainty

More flexible for charity trusts

• no requirement that objects must be certain

They are validly created provided there is intention for a charitable purpose

• purpose must not be vague in a way that means the courts struggle to control to application of assets

What is Cy-Pres

Any funds that remain is a charitable trust fails are applied to a similar purpose and do not revert to settlor

What constitutes poor

s.3(1)(a)

Poor does not mean destitute but instead those who dont have access to what many would take for granted

Mary Clark Homes Trustees v Anderson - poor if “unable to maintain a modest standard of living”

This includes temporary hardship - IRC v Oldham Training (1996) a trust for unemployed from business was held as being charitable

How to establish a charitable purpose

Have a charitable purpose and a public reach

• brief certainty of intention

• recognise beneficiary principle and exceptions

1. Charitable purposes

2. Public benefit

3. Exclusively charitable

Public benefit requirement

If not satisfied charity cannot be registered and this must be an ongoing benefit

The presumption for a benefit for poverty, education and religion has been abolished from s.4(2) CA 2011

The CA 2011 does not give us a direct definition but the commission is there to give guidance.

2013 updated guidance on public benefit requirement

1) Identifiable Benefit - nature itself must be seen as beneficial to community

2) To Public - number of ppl benefitting must be sufficient

What is identifiable benefit

Not based on personal views

Re Hummeltenberg (1923) - could not be identified as sufficient benefit for a college for medians

Can be proved by evidence if needed

Re Shaw (1957) - a trust for making 40 letter alphabet was not held as charitable as was not of general utility to the public

Class of ppl may be small and still sufficient

To public

Must not exclude poor e.g. hospice for millionaires

May charge fees e.g. school feed Independent School Council v Charity Commission (2011)

Can make profit if puts it back into charitable work