Charitable and Non-Charitable Purpose Trusts

Question 1

What is the general intention of purpose trusts?

Answer 1

To advance a cause / purpose

Question 2

What is the rule against perpetuities in relation to purpose trusts?

Answer 2

If a purpose trust is not charitable, it is void if it locks away capital for more than 21 years

Trustees must be able to spend all the trust capital on the purpose in one go and thereby end the trust at any time

Question 3

In order for a trust to be charitable, what must it do?

Answer 3

Seek to promote or attain at least 1 of the 13 purposes listed in the Charities Act 2011

Question 4

What are 3 key examples of purposes from the Charities Act?

Answer 4

1. Prevention / relief from poverty
2. Advancement of education
3. Advancement of religion

Question 5

What is a key exclusion that must be met when establishing that a purpose trust meets a valid purpose in order to make it a valid charitable trust?

Answer 5

It must not have a political purpose

Question 6

What are the considerations in relation to the size of a charitable trust?

Answer 6

Must benefit a sufficiently large section of the public

Cannot be within personal nexus, e.g. employees or family

Must not create a class within a class, i.e. restrict the beneficiaries

Cannot exclude the poor, e.g. fee paying schools must offer scholarships / bursaries

Question 7

What is a Re Denley trust?

Answer 7

A valid non-charitable purpose trust meeting following criteria

1. Purpose of trust is sufficiently clear and gives rise to sufficiently tangible benefits
2. Persons who stand to benefit from carrying out purpose must be ascertainable – description must be conceptually certain
3. Must be limited to 21 years

Question 8

What is a purpose trust of imperfect obligation?

Answer 8

A valid non-charitable purpose trust which is either to care for specific animals, or to maintain a grave / tomb