Charitable and Non- Charitable Purpose Trusts Flashcards
What is a purpose trust
The settlor may wish to set up a trust to carry out a purpose or advance a cause.
Rule against perpetuities/inalienability of capital if either: (Non-charitable purpose trusts)
Non- charitable purpose trusts are void unless either:
(a) the trust states that it is to last for no more than 21 years; or
(b) the trustees may spend all the trust capital on the purpose and thereby end the trust at any time.
Charitable trusts - exemptions and conditions
Exempt from the beneficiary principle and the rule against perpetuity/inalienability of capital.
Trust satisfies the conditions set out in the Charities Act (CA) 2011:
(a) the trust must be for a charitable purpose;
(b) the trust must have sufficient public benefit; and
(c) the trust must be exclusively charitable.
Charitable trusts - conditions - charitable purposes
A trust must seek to promote or attain at least one of these purposes in s3(1) CA 2011.
e.g.
(a) The prevention or relief from poverty.
(b) The advancement of education.
(c) The advancement of religion.
Charitable trusts - conditions - public benefit
(a) the trust purpose must have an identifiable benefit; and
(b) the benefit must be public
Offered to whole public or if a restricted group must be a sufficient section depending on which purpose you are trying to achieve.
Charitable trusts - conditions - exclusively charitable
(a) to be charitable, a trust must not have political purposes; and
(b) if a charitable organisation charges fees, the profits from those fees must be ploughed
back into the trust rather than be paid over to private individuals (such as the owners of
the organisation).
Valid non- charitable purpose trusts
If a purpose trust is not charitable, it will only overcome the beneficiary principle and the rule
against inalienability of capital if either:
(a) it is a Re Denley trust; or
(b) it is a trust of imperfect obligation.
Valid non- charitable purpose trusts - Re Denley trusts
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 the carrying out of the purpose must be
ascertainable; and
(c) the trust must not offend the rule against inalienability of capital, ie it must be limited
to 21 years in duration or the trustees must be able to spend all the trust capital on the purpose and bring the trust to an end.
Valid non- charitable purpose trusts - Trusts of imperfect obligation
These trusts include:
(a) trusts to care for specific animals, such as a favourite pet; and
(b) trusts to maintain graves and tombs.
In both cases, there is no human beneficiary who can enforce the trust and they therefore offend the beneficiary principle.
These trusts are valid but unenforceable. No one can force you to spend money on dog.
