Trusts - Purpose Trusts

What are the two key exceptions to the beneficiary principle?

Charitable purpose trusts and non-charitable purpose trusts.

Who can enforce CP trusts?

the AG (but in practice the Charity Commission)

Why are charitable purpose trusts recognized despite lacking ascertainable beneficiaries?

Because they are for the public benefit.

What is the legal status of a charity?

Charity is a status, not a legal form or structure.

What are some benefits of having charitable status?

1) No requirement to comply with the beneficiary principle;

2) More flexible rules on certainty of objects;

3) No limit on duration;

4) Cy-près doctrine allows application for other charitable purposes;

5) Tax benefits.

What must a non-charitable purpose trust's purpose fall within to be valid?

- A recognized exception to the beneficiary principle classified in Re Endacott

- and only apply when a trust is created in a will

Can NCP trusts be enforced?

no

How does the certainty of objects differ between charitable and non-charitable purpose trusts?

Charitable purpose trusts benefit from relaxed rules of certainty of purpose, while non-charitable purpose trusts require clear purpose.

Which trusts does the rule against inalienability apply?

It applies only to non-charitable purpose trusts.

What is required for certainty of purpose in charitable purpose trusts?

- An intention to apply property for a charitable purpose is sufficient

- not as much certainty required as for normal trusts

How is uncertainty handled in charitable purpose trusts?

- If there is uncertainty as to how this will be carried out, trustees can direct that the property is applied for charitable purposes that they select

- CC or court can provide a scheme to specify the charitable purposes the property should be applied to

What will happen if an NCP trust is uncertain?

will be void

Will purposes of maintaining good understanding between nations and preserving newspaper independence be certain for a NCP trust?

- the trust was found void due to uncertainty of purposes

What is required for a charitable purpose trusts?

must:

1. Be for a charitable purpose (one of the 12 heads, or a purpose analagous to/in the spirit of the other purposes)

2. Satisfy the public benefit test; and

3. Be wholly and exclusively charitable.

What are the 12 specific heads of charity?

The 12 specific heads of charity are:

1. The prevention or relief of poverty.

2. The advancement of education.

3. The advancement of religion.

4. The advancement of health or the saving of lives.

5. The advancement of citizenship or community development.

6. The advancement of the arts, culture, heritage or science.

7. The advancement of amateur sport.

8. The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity.

9. The advancement of environmental protection or improvement.

10. The relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage.

11. The advancement of animal welfare.

12. The promotion of the efficiency of the armed forces of the Crown or of the efficiency of the police, fire and rescue services or ambulance services.

What does poverty mean?

- not having the resources to provide for oneself

- 'distressed gentlefolk' and 'ladies of limited means' = poverty

- can be temporary hardship

- can be inferred - eg provision of a soup kitchen

What constitutes advancement of education?

- Includes training, research and broader education in skills development

- scholarships (Re Gott)

- students' unions

- Must have educational value to researcher or contribute to communicable knowledge (Re Hopkins' Will Trust)

What are the requirements for advancement of religion?

- Can include belief in one or multiple gods, or no god

- Must show relationship with supreme being through worship

- Must have identifiable positive moral/ethical framework

- Must positively advance the religion through services, pastoral or missionary work

What are examples of advancement of religion?

Can include support of religious orders, public masses, repair of religious buildings

What are the key aspects of health advancement and saving lives?

- Prevention/relief of sickness and human suffering

- Includes alternative medicine (with evidence of benefits)

- Includes provision of hospitals, healthcare advice

- And also rescue services like lifeboats and mountain rescue

What does wholly and exclusively charitable mean?

For a trust to have charitable status, all its purposes must be charitable.

Trust with charitable and non-charitable purposes

The trust will be void unless the non-charitable purpose falls within a recognised category of non-charitable purpose trusts.

What happens if a trust fails?

the property will return to the settlor on a resulting trust.

Will a charitable trust be valid if there is also a non-charitable purpose?

If the non-charitable purpose can be construed as 'incidental or subsidiary' to the main charitable purpose, the trust will remain effective

What will the court do if the charitable and non-charitable purpose of the trust can be separated, and a fund allocated to each?

- the court will 'sever' the trust and recognise the charitable part

- only possible if the trust language contemplates severance

Is there a presumption of public benefit for charitable trusts?

No

What are the 2 elements of public benefit requirement?

a) Whether there is an identifiable benefit;

b) What constitutes the public, or a section of the public.

Public benefit requirement - Identifiable benefit

- It is a question of fact as to whether there is a benefit to the public having regard to all the evidence in the particular case.

- irrelevant of the settlor's belief

- Benefit is balanced against any detriment or harm arising from the purpose.

Public benefit requirement - Beneficial to the public

purpose must be beneficial to the public or section of the public, not to a private class of individuals:

a) the possible beneficiaries must not be negligible in number

b) the quality which distinguishes them from other members of the community must not depend on their relationship to a particular individual

(eg a trust for employees of a company was not beneficial to the public, as it was based on relationship with employer

Can a charity validly choose to focus on a group of individuals?

Yes, as long as they have proper reason to do it, the poor are not excluded from benefit, and must ensure that benefits are still available to a sufficiently large section of the public.

Can charities have political objectives?

No

- Cannot seek to change law/government policy

- Cannot promote political party views

- But CAN use political means for non-political objectives (little distinction in practice)

What is the cy-près doctrine?

- Where a charitable purpose trust fails, any surplus funds will be applied to another charitable purpose by way of a scheme established by the Charity Commission or court.

- (rather than forming a resulting trust)

Under what 5 grounds can the original purpose of a charitable gift be altered?

a) The original purpose has been fulfilled or cannot be carried out.

b) The original purpose may still be workable but does not provide a use for all the property available to the trust.

c) The property from similar trusts is combined so as to be used more effectively.

d) The original purpose referred to an area or class of persons which is no longer relevant or suitable.

e) The purpose has:

i. been adequately provided for by other means;

ii. ceased to be charitable in law;

or iii. ceased to provide a suitable and effective method of using the property.

When will general charitable intention be needed to apply the cy-pres doctrine?

- needed if there is an initial failure = property cannot be applied to the specific purpose from the very beginning

- general charitable intention = "£5,000 for the relief of poverty in the parish"

Can cy-pres doctrine apply where there are insufficient funds for the purpose?

There could be no cy-près application of the funds when they transpired to be insufficient for the intended purpose.

What are the requirements for a valid non-charitable purpose trust?

must be a trust created in a will be one of the exceptions listed in Re Endacott

What are the 3 classifications in Re Endacott?

1. Trusts for the maintenance of particular animals,

2. Trusts for the erection and maintenance of monuments and graves for private individuals (not of cultural importance)

3. Trusts for the saying of private masses

(will not be extended by analogy, like charitable trusts)

Are trusts for the erection and maintenance of monuments and graves considered charitable?

No, unless they are of cultural or historical importance; private monuments and graves are not charitable.

Can a trust for conducting religious ceremonies be charitable?

Yes, if it passes the public benefit test; however, private ceremonies do not qualify.

What are trusts of imperfect obligation?

Non-charitable purpose trusts that fall within the Endacott categories and are recognized as valid but are not enforceable.

What is a Pettingall order?

An order requiring a trustee to give an undertaking to comply with the terms of a trust.

What happens if a trustee does not comply with a trust's terms?

The testator's residuary legatees can sue to enforce the undertaking.

What should be included in the drafting of a non-charitable purpose trust to avoid failing for want of perpetuity?

An express perpetuity clause.

What is the role of the court in relation to non-charitable purpose trusts?

The court recognizes their validity but does not enforce them.