Charitable purpose trusts Flashcards
Why do the perpetuity rules exist?
Trusts are intended to be temporary.
What is the rule against remoteness of vesting?
Requires vested interest in trust property within a perpetuity period - applies to charitable and normal trusts
What is the perpetuity period set by the Perpetuities and Accumulations Act 2009 s5(1) for the rule against remoteness of vesting?
125 years
What happens if an interest does not vest within the perpetuity period?
It is void
What is the wait and see rule under s7 of the Perpetuities and Accumulations Act state about trusts?
Trust can subsist until it is clear that the interest cannot vest
What is the purpose of the ‘Class Closing’ Rules under s8 PandA act s5(1)?
Exclude objects which would cause the trust to fail due to vesting outside the perpetuity period
What is the common law rule against inalienability relevant to?
Non-charitable purpose trusts
What is the maximum duration for non-charitable purpose trusts under common law?
Specified life in being plus 21 years or 21 years if no period is specified
What are the benefits of a charitable purpose trust?
- No requirement to comply with beneficiary principle
- More flexible rules on certainty of objects
- No limit on their duration
- Cy-près doctrine allows trust property to be applied for other charitable purposes even if the specific trust fails
- Tax benefits
What happens to capital that vests in charity trustees?
Capital held by charity trustees continues to be used for charitable purposes unless the property runs out.
If well managed, the property will never run out - the trust will continue until the purposes fail
What is the rule regarding certainty of purpose in charitable trusts?
The rule is more flexible; it is sufficient to show intention to apply property for a charitable purpose.
How do courts handle uncertainty in charitable trusts?
Courts seek to resolve uncertainty and can hold the trust valid if charitable intent is established.
How is certainty of purpose defined for trusts that are not charitable?
Purposes must be so defined that if the trustees surrendered their discretion, the court could carry out the purposes declared
What are the requirements to be a charitable purpose trust?
- Be for a charitable purpose under s2(1)(a) Charities Act
- Satisfy the public benefit test
- Be wholly and exclusively charitable
What are some specified heads of charity under Section 3(1) of the Charities Act 2011?
- Prevention of relief or povery
- Advancement of
- Education
- Religion
- Health/saving lives
- Citizenship/community development
- Arts, culture, heritage or science
- Amateur sport
- Human rights, conflict resolution or reconciliation, promotion of diversity
- Environmental protection
- Animal welfare
- Efficiency of armed forces/police
- Relief to those in need because of youth, age, illness, disability
- Wide general purpose clause s 3(1)(m)
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What must be made out to satisfy the public benefit test?
- Is there an identifiable benefit
- What constitutes the public/section of the public
Is there a definition of public benefit in the charities act?
No definition in the charities act.
How is identifiable benefit determined?
- Question of fact - settlor’s belief as to benefit is not relevant
- Benefit is balanced against any harm arising from the purpose
- The benefit must be capable of being identified and described
What elements are required to satisfy the section of the public part of the public benefit test?
- Possible beneficiaries must not be negligible in number
- Quality which distinguishes them from other members of the community must be one which does not depend on their relationship to a particular individual (Oppenheim v Tobacco Securities Trust Co Ltd)
Can charities focus on certain beneficiaries and still satisfy the public benefit test?
Yes, as long as they have proper reasons and the poor are not excluded.
Can charities charge for their services?
Yes, and they can even make a profit.
What must trustees ensure if charges are unaffordable for the poor?
Trustees must make sure the poor can otherwise benefit.
Can charities pursue political objectives?
No, they cannot pursue political objectives.
What is the general rule if a trust is not wholly and exclusively charitable?
The trust will be void
What happens if a non-charitable purpose is incidental to a charitable purpose?
The trust will remain effective as long the purposes can be separated and a fund allocated to each.
(Latimer v IRC)
What is the Cy-Près Doctrine?
Surplus funds will be applied to another charitable purpose by a scheme established by the Charity Commission or court if there is a general charitable purpose.
What are the grounds for altering the purpose of a charitable gift?
- Original purpose fulfilled
- Original purpose has no use from property
- Property from similar trusts is combined to be used more effectively
- Original purpose referred to an area which no longer exists
- Purpose no longer needed.
What occurs in the case of an initial failure of a charitable purpose?
The purpose can be altered under the Cy-Près Doctrine if there is a general charitable purpose.
