Purpose trusts

Question 1

Purpose Trust - Definition

Answer 1

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

Question 2

Purpose trust - Declaring trust

Answer 2

Two validity issues which become a problem for purpose trusts:
1) The beneficiary principle
2) The rule against perpetuities

Question 3

The beneficiary principle

Answer 3

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

Question 4

The charitable exception - Definition

Answer 4

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

Question 5

The charitable exception - Charitable purposes

Answer 5

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

Question 6

The charitable exception - Public benefit

Answer 6

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

Question 7

The charitable exception - Public benefit - 1) Benefit aspect

Answer 7

Benefit must be clear and must relate to the purposes of the charity. Any detriment/harm must not outweigh the benefit.

Question 8

The charitable exception - 2) Public benefit

Answer 8

The purposes must be of benefit to the public in general or to a sufficient section of the public.

Question 9

The charitable exception - 2) Public benefit - Geographical restrictions

Answer 9

Only acceptable if they are related to the aims of the charity. However if they’re further restricted then it’s not acceptable

Question 10

The charitable exception - 2) Public benefit - Personal nexus

Answer 10

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

Question 11

The charitable exception - Exclusively charitable

Answer 11

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

Question 12

Trusts of imperfect obligation - Care/maintenance of animals

Answer 12

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’

Question 13

Trusts of imperfect obligation - Maintenance of graves

Answer 13

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’

Question 14

Trusts of imperfect obligations - What they need to satisfy

Answer 14

Certainty of object and rules against inalienability

Question 15

Denley trusts - Definition

Answer 15

If someone has a direct or indirect benefit from the purpose to enable them to enforce the trust

Question 16

Denley trusts - conditions

Answer 16

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?

Question 17

Denley trusts - Certainty of objects test

Answer 17

Postulant test. The number of people to benefit must not be so large that the trust would be administratively unworkable

Question 18

Rule against perpetuities - Rule against inalienability of capital - Non-chartiable purpose trusts

Answer 18

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

Question 19

Non-charitable purpose trust and purpose

Answer 19

The purpose must be sufficiently clear

Question 20

Preventing poverty and public benefit

Answer 20

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’