5. Charitable and Other Purpose Trusts

Question 1

What are the two categories of purpose trusts?

Answer 1

1. Charitable trusts
2. Non-charitable purpose trusts

Question 2

What are the three distinctive features of charitable trusts?

Answer 2

1. No requirement of ascertainable human beneficiaries
2. Cy-pres doctrine applies
3. May be perpetual

Question 3

What are the two requirements for a charitable trust?

Answer 3

1. Principal purpose(s) must be charitable and exclusively so
2. Must be for public benefit

Question 4

What are some of the charitable purposes under the Charities Act 2011?

Answer 4

• Poverty
• Education
• Religion
• Health or saving lives
• Community development
• Arts, culture, heritage
• Amateur sport
• Human rights
• Environment
• Animal welfare

Question 5

What is the public benefit test for a charitable trust?

Answer 5

Trust must bestow identifiable benefit on the public or a section of the public

Question 6

When will a charity who charges fees fail the public benefit test?

Answer 6

If only those who can afford to pay the fees can benefit

Question 7

What is the incidental private benefit exception?

Answer 7

An otherwise valid charitable trust which incidentally benefits some private individuals will not fail

Question 8

What is the status of political purposes?

Answer 8

A charitable trust cannot have political purposes, and political parties cannot be charities. However, a trust whose political activity is merely ancillary will not fail for this.

Question 9

In what situation only are non-charitable purposes allowed?

Answer 9

When they are incidental to a principal charitable purpose, or an exception applies

Question 10

For where a trust has multiple purposes, what must be true for it to be a charitable trust?

Answer 10

Each principal purpose must be charitable

Question 11

Where there is a mix of charitable and non-charitable principal purposes, what can the court do to prevent the charitable purpose trust from failing?

Answer 11

Sever the charitable from the non-charitable purposes

Question 12

Despite not having ascertainable beneficiaries, who is able to enforce a charitable trust?

Answer 12

The Attorney General, on behalf of the public

Question 13

What are the perpetuities rules and which ones apply to charitable trusts?

Answer 13

1. Remoteness of vesting rule – 125 years (applies as normal, unless charity to charity transfer)
2. Inalienability rule – 21 years (does not apply to charitable trusts)

Question 14

When does the cy-pres doctrine apply, and what does it permit the court to do?

Answer 14

Cy-pres applies when the charitable purpose of a trust has become impossible or impractical, and it permits the court to direct trust property be applied for another charitable purpose as close as possible to the original one rather than allowing the trust to fail

Question 15

How many approaches to cy-pres are there, what does the applicability of each depend on, and what does the use of each determine?

Answer 15

Two approaches, depending on when the objectives became impossible relative to the trust, and the approach determines whether charitable intent on behalf of the settlor is needed

Question 16

Is charitable intent of the settlor required if the gift fails (1) at the time the trust comes into operation, and (2) after the trust comes into operation?

Answer 16

Initial failure: Cy-pres requires general charitable intent of settlor
Subsequent failure: No charitable intent needed

Question 17

On the exam how might cy-pres be tested?

Answer 17

A gift to charity in a will fails because charity is closed down. The correct answer will depend on when, relative to the testator’s death, the charity closed down. If after, no intent required.

Question 18

What makes a general charitable intent difficult to infer?

Answer 18

When the testator has taken care to identify a specific named charity

Question 19

What is an example of cy-pres in operation?

Answer 19

Funds raised to build a sport ground in the town. The target needed is not met to carry out this project. The funds may be applied to another purpose cy-pres as long as the donors are unknown

Question 20

What are the four private purpose trusts which are valid in exception to the general rule, subject to perpetuity rules?

Answer 20

1. Denley trusts
   and honorary trusts for the:
2. Maintenance of particular animals
3. Saying of private masses, and
4. Erection and maintenance of monuments and graves

Question 21

What is a Denley trust?

Answer 21

A trust which appears to be for a private purpose but is valid because it is actually for the benefit of ascertainable human beneficiaries, e.g. where beneficiaries are employees of a company, at any given time, there will be a record of every single person who is an employee

Question 22

What can beneficiaries under a Denley trust not do, and why?

Answer 22

They cannot use the rule in Saunders v Vautier to terminate the trust (by request to the trustees as long as all beneficiaries have an absolute interest and are of age and sound mind) because the inferred beneficiaries under a Denley trust do not have a full beneficial interest (although they may apply for injunction if trustee in breach)

Question 23

Why are the private purpose trusts for maintenance of animals, and graves, and the saying of masses honorary?

Answer 23

Because there is no beneficiary to enforce the trust, the trustee is bound by honour to carry of the trust

Question 24

What happens if the trustee refuses or fails to carry out an honorary trust?

Answer 24

A resulting trust is imposed for the settlor or their estate

Question 25

What is meant by the fact the court will not take judicial notice of the subject matter of an honorary trust for perpetuity purposes?

Answer 25

The court will not take into consideration the likely lifespan of a particular animal, so a gift for an animal’s maintenance will fail unless specific provisions are made limiting its duration, unless it is obvious the entire gift will be spent within the perpetuity period

Question 26

Where a timescale is not specified, how can it be inferred based on value that a gift does not breach the vesting rule?

Answer 26

If the amount will likely be spent within 21 years, the gift is likely allowed