Chapter 4- Charitable and Non- Charitable Trusts

Question 1

What is a purpose trust?

Answer 1

To achieve a purpose or attain an objective or aim.
They are a form of express trust

Question 2

When can a purpose trust be made?

Answer 2

(a) the settlor must make a valid declaration of trust; and
(b) property must be put in the trust

Question 3

What are the two validity rules when it comes to the declaration of trust in purpose trusts but not trusts for individuals?

Answer 3

(1) the BENEFICIARY Principle- which requires that trusts ordinarily directly benefit individuals
(2) the rule AGAINST PERPETUITIES- which requires that property should not be locked away for too long.

Question 4

What are the validity rules for the declaration of trust for purpose trusts?

Answer 4

(a) Certainty of INTENTION
(b) Certainty of SUBJECT-MATTER
(c) Certainty of OBJECTS
(d) BENEFICIARY Principle
(e) PERPETUITIES
(f) FORMALITIES

Question 5

What is the beneficiary principle?

Answer 5

Generally, trusts are valid only if they have beneficiaries, who can go to court to enforce the trusts.

Question 6

Why can purpose trusts offend the beneficiary principle?

Answer 6

Because there is no individual who can go to court to enforce the trust. As a general rule, purpose trusts are void.

Question 7

What is the rule against perpetuities for purpose trusts?

Answer 7

Property should not be locked away in a trust for too long.
If the purpose trust is non-charitable, it will be void if it locks capital away for a period of more than 21 years.

Question 8

What are the two exceptions for when a non-charitable purpose trust are void for offending the rule against inalienability of capital?

Answer 8

(a) the trust states that it is to last for no more than 21 years, or for ‘as long as the law allows’
(b) the trustees may spend all the trust capital on the purpose and thereby end the trust at any time.

Question 9

What are charitable trusts exempt from?

Answer 9

The beneficiary principle
The rule against inalienability of capital.

Question 10

What conditions must be met for a trust to be registered as a charity?

Answer 10

to be registered as a charity, the Commission will decide whether the trust satisfies the conditions set out in 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

Question 11

What are the three main charitable purposes set out un s3(1) CA?

Answer 11

The prevention or relief from poverty.
The advancement of education.
The advancement of religion.W

Question 12

What is considered as poverty?

Answer 12

Poverty does not necessarily mean destitution, but refers to ‘persons who have to go short in the ordinary of that term’.

Question 13

What is considered to advance education?

Answer 13

Scholarships, the building of educational facilities, the maintenance of museums and libraries

Question 14

What is considered to a dance religion?

Answer 14

Religion means more than ethical values and philosophical discussions.
The charity must take positive steps to sustain and increase religious belief.

Question 15

What is the public benefit test?

Answer 15

(a) the trust purpose must have an identifiable benefit or benefits; and
(b) the benefit must accrue to the public or a sufficiently large section of the public

Question 16

What are identifiable benefits?

Answer 16

The benefit of the trust must be clear, and it must relate to the purposes of the charity.
An potential detriments have to be outweighed for the clear primary benefit

Question 17

What is meant by the benefit must be to the public?

Answer 17

Must be to the whole public and not just a section of it.
Cannot be a class within a class.

Question 18

What is the test for a charitable purpose benefiting the public regarding the prevention or relief from poverty?

Answer 18

A trust to named individuals cannot be for a charitable purpose.

Question 19

What is the test for a charitable purpose benefiting the public regarding the advancement of religion?

Answer 19

Public benefit will be present if:
(i) the place of worship is open to all, even if only a small number attend
(ii) whilst the place of worship is not open to all, members of the relevant congregation ‘live in this world and mix with their fellow citizens’.

Question 20

What is the test for a charitable purpose benefiting the public regarding the advancement of education?

Answer 20

The people who might benefit from these charitable purposes must not be numerically negligible, but also trusts seeking to achieve these purposes have to overcome a number of tests
(i) the PERSONAL NEXUS test- people linked by a personal nexus.
(ii) the CLASS WITHIN A CLASS TEST
What is not permitted is the imposition of ARBITRARY RESTRICTIONS.
(iii) must not exclude the poor- eg fee charging schools can charge fees as long as profits are poured back into the charity.

Question 21

What makes a trust exclusively charitable?

Answer 21

A trust with both charitable and non-charitable trusts will not be charitable.
There tend to be two different aspects to this:
(a) to be charitable, a trust must not have political purposes
(b) if a charitable organisation charges fee, the profits from those fees must be ploughed back into the trust

Question 22

What are thought to be political purposes?

Answer 22

(a) supporting a political party
(b) campaigning for a change in the law or a change in government policy/ decisions.
BUT, charities can engage in activities that are ancillary or incidental to their main cause, so long as they do not become the dominant means by which the charity carries out its purpose.

Question 23

When can a trust overcome the BENEFICIARY principle and the rule AGAINST INALIENABILITY if it is not a charitable trust?

Answer 23

If, either
(a) It is a RE DENLEY trust
(b) it is a trust of IMPERFECT OBLIGATION

Question 24

What is a Re Denley Trust?

Answer 24

If the declaration of trust identifies the people who will benefit from a particular purpose then problems with the beneficiary principles can be overcome.

Question 25

When can a trust be a valid Re Denley trust?

Answer 25

(a) the purpose of the trust must be sufficiently clear and give rise to a sufficiently tangible benefit
(b) the persons who stand to benefit from carrying out the purpose must be ascertainable. In order to work out who can enforce the purpose trust, it is thought that the description of those persons who stand to benefit must therefore be CONCEPTUALLY CERTAIN
(c) The trust must not offend the rule against INALIENABILITY

Question 26

What do trusts of imperfect obligation include?

Answer 26

(a) trusts to care for specific animals, such as a favourite pet
(b) trusts to maintain graves and tombs
Neither have a human beneficiary, therefore offence the beneficiary principle.
These trusts must comply with the rule against inalienability of capital.