6 - Charitable and Non-Charitable Purpose Trusts Flashcards
What is a purpose trust, and how does it differ from trusts for individuals?
A purpose trust is an express trust where the settlor’s intention is to achieve an objective, aim, or purpose, rather than directly benefiting individuals.
Purpose trusts follow the general rules for express trusts, including a valid declaration of trust and the property being put in trust.
What are the validity rules for the declaration of a trust (not purpose trusts)?
Certainty of intention: Clear intent to create a trust.
Certainty of subject matter: Clear what property is held in trust.
Certainty of objects: In purpose trusts, the object is the purpose itself. The purpose must be clear.
Beneficiary principle: Generally, trusts must benefit individuals.
Perpetuities (rule against inalienability): Property must not be locked away in trust for too long.
Formalities: Trust declarations involving land must comply with s53(1)(b) of the LPA 1925
What is the rule against perpetuities, and how does it apply to non-charitable purpose trusts?
The rule against perpetuities prevents property from being locked away in a trust for too long.
For purpose trusts, property must not be rendered inalienable for more than 21 years (the rule against inalienability of capital).
Purpose trusts are void unless they:
- Specify that the trust lasts no more than 21 years, or
- Allow the trustees to spend all the capital, thus ending the trust at any time.
Example of a void trust: “I give £40,000 to my Trustees to maintain the changing rooms at Beeston tennis club.” Trustees must generate income, locking capital away indefinitely.
Example of a valid trust: “I give £40,000 to my Trustees to build changing rooms at Beeston tennis club.” Trustees can spend the capital in one go, so it doesn’t lock away the capital perpetually.
What exemptions do charitable trusts have from certain legal principles?
Charitable trusts are exempt from:
- The beneficiary principle, which requires identifiable beneficiaries.
- The rule against the inalienability of capital, which restricts long-term restrictions on property use.
How are charitable trusts enforced and regulated, and what are the conditions for registration under the Charities Act 2011 (CA 2011)?
Charitable trusts are enforced by the Attorney General and regulated by the Charity Commission.
To be registered as a charity, the following conditions must be satisfied under the CA 2011:
(a) The trust must be for a charitable purpose.
(b) The trust must have sufficient public benefit.
(c) The trust must be exclusively charitable.
What is meant by ‘charitable purposes’ under s 3(1) CA 2011?
Charitable purposes are defined under s 3(1) CA 2011 and include a range of activities that provide public benefit.
This includes:
Prevention or relief of poverty: Addressing the causes of poverty or providing relief from its effects.
Advancement of education: Supporting formal education and research.
Advancement of religion: Supporting religious worship and outreach.
Advancement of health or saving lives: Provision of healthcare services and rescue operations.
Advancement of citizenship or community development: Supporting civic responsibility and volunteering.
Advancement of the arts, culture, heritage, or science: Promoting art and scientific research.
Advancement of amateur sport: Supporting sports that promote physical or mental well-being.
Advancement of human rights, conflict resolution, religious or racial harmony, or equality and diversity: Promoting equality, diversity, and peaceful conflict resolution.
Advancement of environmental protection or improvement: Promoting sustainable development and conservation.
Relief of those in need due to youth, age, ill-health, disability, financial hardship, or other disadvantage: Providing care and support services for disadvantaged individuals.
Advancement of animal welfare: Preventing animal cruelty and promoting care for animals.
Promotion of the efficiency of the armed forces, police, fire, rescue services, and ambulance services: Supporting the public defence and security services.
What are examples of charitable activities for the prevention or relief of poverty under s 3(1) CA 2011?
Poverty refers to “persons who have to go short in the ordinary [meaning] of that term” (Re Coulthurst). Charity Commission guidance suggests it includes financial hardship relief, such as trusts for the unemployed or those affected by famine.
Prevention or relief of poverty under s 3(1) can include:
- Grants of money or provision of essential items (furniture, food, heating appliances).
- Payment for services such as repairs, laundering, meals, or utilities.
- Provision of facilities for vocational training or technical skills to help individuals improve their living standards.
What are examples of charitable purposes for the advancement of education under s 3(1) CA 2011?
Advancement of education includes:
- Supporting schools, colleges, universities, and community education programmes.
- Organisations such as parent-teacher associations, student unions, or those funding educational research.
- Pre-school and extracurricular programmes like summer schools and homework clubs.
Covers scholarships, educational facilities, museums, libraries, and useful research where results are published.
How is the advancement of religion defined as a charitable purpose under s 3(1) CA 2011?
The advancement of religion includes:
- Belief in a god or supreme being and practices showing worship.
- Supporting places of worship, raising awareness of religious practices, and carrying out religious devotional acts.
- Missionary and outreach work are also included under this head.
Religion involves sustaining religious belief through funding services, maintaining places of worship, or distributing religious materials (Hodkin v Registrar General of Births, Deaths and Marriages).
What constitutes the advancement of health or the saving of lives under s 3(1) CA 2011?
This charitable purpose includes:
- Preventing or relieving sickness, disease, or human suffering.
- Provision of medical treatment and comfort items for the sick or infirm (e.g., hospital radio).
- Funding medical research and providing rescue services like lifeboats and first aid.
What is meant by the advancement of citizenship or community development under s 3(1) CA 2011?
This purpose involves:
- Promoting civic responsibility, volunteering, and supporting community infrastructure.
- Supporting urban and rural regeneration and developing social responsibility within communities.
What are some examples of charitable activities for the advancement of the arts, culture, heritage, or science under s 3(1) CA 2011?
Advancement of arts, culture, heritage, or science includes:
- Supporting art galleries, theatres, museums, and local history projects.
- Preservation of historic sites or buildings and promoting scientific research through learned societies like the Royal College of Nursing.
- Expert evidence of artistic merit needed.
What does the advancement of amateur sport entail as a charitable purpose under s 3(1) CA 2011?
This purpose includes:
- Supporting sports or games that promote physical or mental exertion, such as local sports clubs, multi-sports centres, and even bridge clubs for mental engagement.
What charitable activities fall under the advancement of human rights, conflict resolution, or the promotion of racial harmony under s 3(1) CA 2011?
Advancement of human rights, conflict resolution, or promotion of equality and diversity includes:
- Promoting restorative justice, resolving international conflicts, eliminating discrimination, and fostering inter-faith understanding.
What charitable purposes are included in the advancement of environmental protection or improvement under s 3(1) CA 2011?
This includes activities like:
- Conserving natural resources and promoting sustainable development (e.g., renewable energy research).
- Zoos, wildlife preservation, and efforts to protect the environment through recycling and biodiversity promotion.
What activities are considered charitable under the relief of those in need due to youth, age, ill-health, disability, financial hardship, or other disadvantage under s 3(1) CA 2011?
Examples include:
- Providing accommodation and care services, such as care homes, drop-in centres for the elderly, or housing for those in need (e.g., almshouses).
- Supporting the upbringing of children or providing specialist equipment for those with disabilities.
How does the advancement of animal welfare fit within charitable purposes under s 3(1) CA 2011?
Animal welfare includes:
- Preventing cruelty to animals, providing veterinary care, and supporting animal sanctuaries.
- Re-homing abandoned animals and promoting kindness to prevent suffering.
What does promoting the efficiency of the armed forces, police, and rescue services involve under s 3(1) CA 2011?
This purpose includes:
Supporting the technical knowledge, fitness, and recruitment of service members.
Memorials for fallen colleagues and emergency rescue services.
What constitutes a general charitable purpose for charitable purpose trusts?
This provision covers purposes which would have been recognised as charitable under the previous law, or purposes which are analogous to or within the spirit of the statutory heads of charity and earlier case law.
This principle of recognising charitable purposes by analogy is a long-standing principle of charity law. It ensures that the law on charitable purposes is flexible and can evolve to include additional purposes that were not specifically envisaged when the Act was drafted but nonetheless merit charitable status.
What is the public benefit test for charitable purpose trusts?
Identifiable benefits: The benefit must be clear and relate to the charity’s purposes. Any detriment should be outweighed by the primary benefit (e.g., a school for pickpockets, while educational, would not be beneficial).
Benefit to the public or a sufficiently large section of the public: Trusts open to the general public, like museums, pass the test even if few take advantage. However, trusts benefiting restricted groups are assessed differently depending on the purpose.
How is the public benefit test applied to trusts for the prevention or relief of poverty?
A trust for relieving poverty among named individuals is not charitable.
However, a trust for “my family” or “my relatives” is charitable, as the prevention of poverty is considered so important that the benefit, even if limited to a small number of individuals, is upheld.
How is public benefit determined for religious charitable purposes?
Public benefit is present if:
The place of worship is open to all, even if only a few attend.
Even if the place of worship is not open to all, members of the congregation “live in this world and mix with their fellow citizens” (Neville Estates v Madden [1962] Ch 832).
Contemplative religious orders that are cloistered and have no contact with the outside world are not charitable (Gilmour v Coats [1949] AC 426).
What are the restrictions on public benefit for educational and other charitable purposes?
Personal nexus test: A trust benefiting people linked by personal relationships, such as family or employment, is not charitable (e.g., Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297).
Class within a class test: The class of people benefiting must be limited by rational or justifiable factors, such as geography, but arbitrary restrictions are not allowed (e.g., IRC v Baddeley [1955] AC 572).
Excluding the poor: Institutions charging fees must not exclude the poor. Fee-charging schools must ensure they provide scholarships or services to the wider public, with more assistance required as fees increase (Independent Schools Council v Charity Commission [2012] Ch 214).
What does it mean for a trust to be exclusively charitable?
A trust must be exclusively charitable. This means it cannot:
Have a political purpose, such as campaigning for legal change (McGovern v Attorney General [1982] Ch 321).
Distribute profits to private individuals; any profits must be reinvested into the charitable purpose. Institutions like private hospitals or care homes run as commercial ventures cannot be charitable.
