Charitable and Non-Charitable Purpose Trusts

Question 1

Purpose trusts

Answer 1

Settlors may want to use trust property to achieve a purpose or attain an objective or aim. These trusts - known as ‘purpose trusts’- are a form of express trust.

Validity rules for the declaration of trust:
a) Certainty of intention
b) Certainty of subject-matter
c) Certainty of objects: the purpose
d) Beneficiary principle
e) Perpetuities: property should not be locked away in trusts for too long.
f) Formalities: if the trust property contains land, the declaration of trust must comply with requirements of the LPA 1925

Question 2

The beneficiary principle

Answer 2

Purpose trusts potentially offend the beneficiary principle because there is no individual who can go to court to enforce the trust.

Question 3

Rule against perpetuities

Answer 3

If the purpose trust is not charitable, it will be void if it locks capital away for a period of more than 21 years.

Question 4

Charitable trusts

Answer 4

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

Question 5

Valid non-charitable purpose trusts

Answer 5

If a purpose trust is not charitable, it will only overcome the beneficiary principle and the rule against inalienability of trust capital if either:
a) it is a Re Denley trust; or
b) it is a trust of imperfect obligation.

RE DENLEY trusts. If the declaration of trust identifies the people who will benefit from a particular purpose then problems with the beneficiary principle can be overcome- the people identified in the declaration of trust will be given standing to enforce the trustees’ duty to apply trust property to achieve the stated purpose and the court can therefore control the trust.

In RE DENLEY’s TRUST DEED (1969) 1Ch 373, a plot of land was transferred to trustees to be maintained and used for a sports and recreation ground for 21 years for the benefit of employees of a named company. Although this was a purpose trust, the court held it was ‘outside the mischief (вред) of the beneficiary principle’. The purpose was sufficiently clear and tangible to allow the employees to go to court to enforce the trust.

TRUST OF IMPERFECTION OBLIGATION. These trusts include:
a) trusts to care for specific animals; and
b) trusts to maintain graves and tombs.