3. Purpose Trusts

Question 1

What are charitable and non-charitable purpose trusts exceptions to?

Answer 1

The beneficiary principle

Question 2

What is the general position on trusts for non-charitable purposes?

Answer 2

They are void

Question 3

Are charitable purpose trusts enforceable?

Answer 3

Yes, by the Charity Commission

Question 4

Are non-charitable purpose trusts generally enforceable?

Answer 4

No, they are trusts of imperfect obligation (if valid)

Question 5

What are the respective sources of the perpetuity periods in charitable and non-charitable purpose trusts?

Answer 5

Charitable - statutory (and therefore not the normal rules)
Non-charitble - common law rules

Question 6

What are the respective effects of failure of purpose on a charitable and non-charitable purpose trust?

Answer 6

Charitable - application of the cy-pres doctrine
Non-charitable - resulting trust in favour of the settlor

Question 7

What is the rule against perpetuities (remoteness of vesting) and to whom does it apply?

Answer 7

• A person or charity must obtain a vested interest in trust property within 125 years or it will be void
• Doesn’t need to be clear from outset - the ‘wait and see’ rule can apply
• Applies to individuals and charities but charitable trusts can exist indefinitely

Question 8

What is the test for validty of a charitable purpose trust?

Answer 8

1. Intention to apply property for a charitable purpose
2. Public Benefit Test
3. Be wholly and exclusively charitable

Question 9

What heads of charity are there?

Answer 9

• Prevention of relief or property
• Advancement of education
• Religion
• Health
• Citizenship or community development
• Arts, culture, heritage or science
• Amateur sport
• Promotion of efficiency of armed forces, police etc
• Those in need due to youth, age, ill health etc
• Human rights, equality and diversity
• Animal welfare
• Environmental protection/improvement

Question 10

What does ‘education’ include for charity?

Answer 10

Training, research and broader education

Question 11

What does ‘environment’ include for charity?

Answer 11

Includes conservation of a particular animal, bird etc

Question 12

What does ‘animal welfare’ not include for charity?

Answer 12

Care for particular animals e.g. testator’s pets (can be non-charitable trusts)

Question 13

What can trustees do if there’s uncertainty as to how intention of a charity will be carried out?

Answer 13

They can direct that the property be applied for such charitable purposes as they select

Question 14

What is the public benefit test?

Answer 14

a) Identifiable benefit: must be capable of being identified/described (even if not quantified or measured)
b) Beneficial to public, or section of public,
- not a private class
- must not be negligible in number
- must not depend on relationship to a particular person

Question 15

Can charities charge for their services and/or make a profit?

Answer 15

Yes and Yes
Can make a profit if reasonable and necessary

Question 16

When is a charitable trust ‘wholly and exclusively charitable’?

Answer 16

All purposes must be charitable
Cannot pursue political objectives (but can use political means to achieve non-political objectives)

Question 17

What happens if there is a mix of charitable and non-charitable elements for a charitable purpose trust?

Answer 17

• Trust will be void unless non-charitable purpose falls within a recognised category of non-charitable purpose trusts
• If non-charitable purpose construed as ‘incidental or subsidiary’, trust remains effective
• If they can be separated, portion of fund allocated to each and trust severed, recognising the charitable trust

Question 18

What is the cy-pres doctrine?

Answer 18

Where a charitable purpose trust fails, any surplus funds are applied to another charitable purpose by Charity Commission or court scheme (if a general charitable intention is shown)

Question 19

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

Answer 19

Court can order alteration if:
1. Original purpose fulfilled or can’t be carried out
2. Original purpose workable but doesn’t provide a use for all property
3. Property from similar trusts combined to be more effective
4. Original purpose for area or class no longer relevant or suitable
5. Purpose has been adequately provided for, ceased to be charitable in law, or ceased to provide a suitable method of using property

Question 20

What is the rule against inalienability and to whom does it apply?

Answer 20

Assets can’t be tied up on trust for longer than a specified life in being plus 21 years (or just 21 years if no life specified) - can’t use animal lives
Must be clear from outset (no wait and see)
Applies to non-charitable purpose trusts

Question 21

What should non-charitable purpose trusts include to ensure they comply with rule against inalienability?

Answer 21

An express perpetuity clause

Question 22

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

Answer 22

Intended purpose very certain
1. Fall within recognised Re Endacott exception to beneficiary principle
2. Created by will

Question 23

What are the Re Endacott exceptions to beneficiary principle for non-charitable purpose trusts?

Answer 23

• Trusts for maintenance of particular animals
• Trusts for erection & maintenance of monuments and graves (not private individuals)
• Trusts for saying of private masses

Question 24

How can the court enforce a non-charitable purpose trust?

Answer 24

Through a Pettingall order.