Purpose trusts Flashcards
Purpose Trust - Definition
Trusts for a purpose or cause they don’t have any beneficiaries to take the share of the trust. The follow the general rules for creating express trusts:
1) Must valid declaration of trust (3 certainties - intention, subject matter, object - this will be the purpose, beneficiary principle, perpetuities and formalities)
2) Constitute the trust
Purpose trust - Declaring trust
Two validity issues which become a problem for purpose trusts:
1) The beneficiary principle
2) The rule against perpetuities
The beneficiary principle
Generally trusts are only valid if they have beneficiaries so a purpose trust would be void. However there are exceptions:
1) The charitable exception
2) Trusts of imperfection obligation
3) Denley trusts
The charitable exception - Definition
3 requirements:
1) Must have a charitable purpose
2) Must have a sufficient public benefit
3) Must be exclusively charitable
Rule against inalienability does not apply
The charitable exception - Charitable purposes
1) Prevention of relief or poverty
2) Advancement of education
3) Advancement of religion
4) Advancement of health or the saving of lives
5) Advancement of citizenship or community development
6) Advancement of the arts, culture, heritage or science
7) Advancement of amateur sport
8) Advancement of environmental protection
9) Animal welfare
The charitable exception - Public benefit
Two aspects
1) Trust purpose must have an identifiable benefit or benefits
2) Benefit must accrue to the public or sufficiently large section of the public
The charitable exception - Public benefit - 1) Benefit aspect
Benefit must be clear and must relate to the purposes of the charity. Any detriment/harm must not outweigh the benefit.
The charitable exception - 2) Public benefit
The purposes must be of benefit to the public in general or to a sufficient section of the public.
The charitable exception - 2) Public benefit - Geographical restrictions
Only acceptable if they are related to the aims of the charity. However if they’re further restricted then it’s not acceptable
The charitable exception - 2) Public benefit - Personal nexus
The benefit must not be restricted to those who have a personal nexus such as familial relationships to given individuals or employment by a common employer
The charitable exception - Exclusively charitable
Must be exclusively charitable if the stated purposes of the trust include anything which is not charitable then the whole trust may be regarded as non-charitable. Political purposes are non-charitable
Trusts of imperfect obligation - Care/maintenance of animals
Trusts for the care or maintenance of specific animals are valid. E.g ‘£30,000 to my trustees to hold on trust to look after my dog Fido’
Trusts of imperfect obligation - Maintenance of graves
Trusts for the maintenance of graves and sepulchral monuments are valid. E.g ‘£20,000 to my trustees to hold on trust to maintain the Hampton family grave’
Trusts of imperfect obligations - What they need to satisfy
Certainty of object and rules against inalienability
Denley trusts - Definition
If someone has a direct or indirect benefit from the purpose to enable them to enforce the trust
Denley trusts - conditions
1) the purpose of the trust must be sufficiently clear and give rise to a sufficiently tangible benefit?
2) the persons who stand to benefit from the carrying out of the purpose must be ascertainable (needs to satisfy the given postulant test)?
4) Does it comply with the rule against inalienability of capital?
Denley trusts - Certainty of objects test
Postulant test. The number of people to benefit must not be so large that the trust would be administratively unworkable
Rule against perpetuities - Rule against inalienability of capital - Non-chartiable purpose trusts
1) Be limited in duration to 21 years or
2) Allow the trustees to spend all the trust capital on the purpose and thereby end the trust at any time
Non-charitable purpose trust and purpose
The purpose must be sufficiently clear
Preventing poverty and public benefit
If it is to prevent poverty the public benefit test will be satisfied so long as the purpose will accrue to a class of individuals even if the class is small. Can be for ‘my children’
