5. Charitable and Other Purpose Trusts Flashcards
What are the two categories of purpose trusts?
- Charitable trusts
- Non-charitable purpose trusts
What are the three distinctive features of charitable trusts?
- No requirement of ascertainable human beneficiaries
- Cy-pres doctrine applies
- May be perpetual
What are the two requirements for a charitable trust?
- Principal purpose(s) must be charitable and exclusively so
- Must be for public benefit
What are some of the charitable purposes under the Charities Act 2011?
- Poverty
- Education
- Religion
- Health or saving lives
- Community development
- Arts, culture, heritage
- Amateur sport
- Human rights
- Environment
- Animal welfare
What is the public benefit test for a charitable trust?
Trust must bestow identifiable benefit on the public or a section of the public
When will a charity who charges fees fail the public benefit test?
If only those who can afford to pay the fees can benefit
What is the incidental private benefit exception?
An otherwise valid charitable trust which incidentally benefits some private individuals will not fail
What is the status of political purposes?
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.
In what situation only are non-charitable purposes allowed?
When they are incidental to a principal charitable purpose, or an exception applies
For where a trust has multiple purposes, what must be true for it to be a charitable trust?
Each principal purpose must be charitable
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?
Sever the charitable from the non-charitable purposes
Despite not having ascertainable beneficiaries, who is able to enforce a charitable trust?
The Attorney General, on behalf of the public
What are the perpetuities rules and which ones apply to charitable trusts?
- Remoteness of vesting rule – 125 years (applies as normal, unless charity to charity transfer)
- Inalienability rule – 21 years (does not apply to charitable trusts)
When does the cy-pres doctrine apply, and what does it permit the court to do?
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
How many approaches to cy-pres are there, what does the applicability of each depend on, and what does the use of each determine?
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
On the exam how might cy-pres be tested?
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.
What is a Denley trust?
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
What is meant by the fact the court will not take judicial notice of the subject matter of an honorary trust for perpetuity purposes?
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
Where a timescale is not specified, how can it be inferred based on value that a gift does not breach the vesting rule?
If the amount will likely be spent within 21 years, the gift is likely allowed
