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Trusts Law > Purpose Trusts > Flashcards

Purpose Trusts Flashcards

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1
Q

Why are charitable trusts not void for infringement of the beneficiary principle?

A

Because there is a mechanism for there enforcement as they can be enforced by the Attorney General with practical responsibility for this lying with the Charity Commission

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2
Q

Is a charity a legal form or structure?

A

No it is a status so charities can come in many forms such as companies or trusts

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3
Q

What are the benefits of charitable status?

A
  • no requirement to comply with the beneficiary principle
  • more flexible rules on certainty of objects
  • no limit on their duration
  • they can exist in perpetuity
  • a rule known as the cy-pres doctrine allows trust property to be applied for other charitable purposes even if the specific trust fails
  • tax benefits
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4
Q

What are the rules for certainty of purpose and charitable purpose trusts?

A
  • it is sufficient that there is an intention to apply property for a charitable purpose
  • if there is uncertainty as to how this intention is to be carried out the trustees can direct that the property be applied for such charitable purposes as they select
  • for charitable purpose trusts, the court will strive to resolve any uncertainty and hold the trust valid once it has established charitable intent
  • charity commission or the court can provide a ‘scheme’ to specify the charitable purposes the property should be applied to
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5
Q

What three requirements must be met for a charity purpose trust to be valid?

A
  • must be for a charitable purpose
  • must satisfy the public benefit test
  • be wholly and exclusively charitable
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6
Q

What are the 12 specific heads of charity in the Charities Act?

A
  • prevention or relief of poverty
  • advancement of education
  • advancement of religion
  • advancement of health or the saving of lives
  • advancement of citizenship or community development
  • advancement of the arts, culture, heritage or science
  • advancement of amateur sport
  • advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
  • advancement of environmental protection or improvement
  • relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage
  • advancement of animal welfare
  • promotion of the efficiency of the armed forces of the Crown or of the efficiency of the police, fire and rescue services or ambulance services
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7
Q

What is the meaning of poverty in the 2011 Act?

A
  • not defined
  • poverty means going short
  • poverty does not mean destitute
  • poverty is a relative concept
  • purpose must not benefit the rich
  • poverty can be a temporary situation
  • poverty can be inferred
  • working class does not equal poverty
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8
Q

What is the meaning of advancement of education under the 2011 Act?

A
  • Not confined to purely formal instruction in an educational institution
  • Can include training, research or broader education in the development of individual capabilities, competencies, skills and understanding
  • includes scholarships to students
  • includes ancillary organisations such as student unions
  • includes distributing knowledge
  • did not include study to create 40 letter phonetic alphabet
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9
Q

What is the meaning of advancement of religion under the 2011 Act?

A

Religion includes:

  • a religion which involves belief in more than one god and
  • a religion which does not involve a belief in a god
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10
Q

What is the meaning of advancement of health/saving of lives under the 2011 Act?

A

Includes prevention or relief of sickness, disease or human suffering as well as the promotion of health

Broad view taken including complementary alternative or holistic methods as well as conventional methods

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11
Q

What is the meaning of advancement of citizenship/community development under the 2011 Act?

A

Includes rural and urban regeneration and the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charities

Must be focus on community rather than individual

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12
Q

What is the meaning of advancement of arts, culture, heritage or science under the 2011 Act?

A
  • includes art of merit - may need expert evidence
  • includes monuments of cultural or historical significance
  • heritage - part of the country’s local or national history and traditions which are passed down through successive generations
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13
Q

What is the meaning of advancement of amateur sport under the 2011 Act?

A

Sport is sports or games which promote health by involving physical or mental skill or exertion

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14
Q

What is the meaning of advancement of human rights under the 2011 Act?

A
  • includes advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
  • must not stray into police objectives such as seeking to procure changes in the law
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15
Q

What is the meaning of advancement of environmental protection under the 2011 Act?

A
  • includes both protection and improvement of the environment
  • includes preservation, conservation, and promotion of sustainable development
  • may need to produce evidence that particular species is worthy of conservation
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16
Q

What is the meaning of advancement of relief of those in need under the 2011 Act?

A

Relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantages

  • includes provision of accommodation or care
  • person does not need to be poor to be in need - must show they have specific need
17
Q

What is the meaning of advancement of animal welfare under the 2011 Act?

A
  • includes welfare of particular types or animals, animals generally, improving methods for slaughtering
  • does not include provision for a specific animal eg my dog
18
Q

What is the meaning of advancement of the efficiency of public services under the 2011 Act?

A
  • promotion of the efficiency of the armed forces of the Crown or of the efficiency of the police, fire and rescue services or ambulance services
  • can include increasing technical knowledge of members of the services through the provision of educational resources, competitions and prizes
  • include providing opportunities for services personnel to gain additional experience relevant to their jobs
19
Q

What is the general charitable purpose provision under the charities act?

A

If not covered by specific head may be caught by general charitable purpose.

Covers things that would have been recognised as charitable under old law or purposes analogous to heads of charity or old case law.

Leaves law flexible

20
Q

What is meant that trusts must be wholly and exclusively charitable?

A

All a trust purposes must be charitable

21
Q

What are the consequences of a trust being a mix of charitable and non-charitable purposes?

A
  • basic rule - trust will be void unless the non-charitable purpose falls within a recognised category of non-charitable purpose trusts. If the not, the trust property will return to the settlor on resulting trust
  • if the non-charitable purpose can be construed as incidental or subsidiary to the main charitable purpose, the trust will remain effective
  • if the charitable and non-charitable purposes can be separated and a portion of the fund allocated to each, the court will ‘sever’ the trust and recognise the charitable party. Only possible if the trust language contemplates severance of the fund. Requires the amount allocated to each purpose to be quantifiable
22
Q

What is meant by the requirement for charitable trusts to be of public benefit?

A
  • not defined in the Act
  • no presumption of public benefit
  • two elements needed (i) identifiable benefit and (ii) to public/section of the public
23
Q

What is an identifiable benefit?

A
  • question of fact - have regard to all evidence in case
  • benefit is to be balanced against any detriment or harm arising from the purpose
  • benefit must be capable of being identified and described even if it cannot be quantified or measured
24
Q

What is ‘public/section of the public’?

A
  • possible beneficiaries must not be negligible in number AND
  • quality which distinguishes them from other members of the community must be a quality which does not depend on their relationship to a particular individual
25
Q

With regard to the public requirement, can charities still meet this requirement if they choose to focus on a specific element of the public?

A

Yes, provided:

  • they have proper reason for doing so
  • the poor are not excluded from benefit
  • the people focussed on are a sufficient section of the public for the charity’s purpose.
26
Q

Can a charity have political objectives?

A

No - courts/charity commission is unwilling to consider whether such a purpose is for the public benefit, preferring to be politically neutral

Charities can however use political means to achieve a non-political objective

27
Q

What is the cy-pres doctrine?

A

Where a charitable purpose trust fails, any surplus funds will be applied to another charitable purpose by way of a scheme established by the Charity Commission or Court.

28
Q

What are the five grounds whereby a charitable trust may be altered?

A

a) the original purpose has been fulfilled or cannot be carried out

b) the original purpose may still be workable but does not provide a use for all the property available to the trust ie there are surplus funds

c) the property from similar trusts is combined so as to be used more effectively

d) original purpose referred to an area or class of persons which is no longer relevant or suitable

e) the purpose has:

i) been adequately provided for by other means

ii) ceased to be charitable in law or

iii) ceased to provided a suitable and effective method of using the property

29
Q

When there is an initial failure of a charitable trust when will the cy-pres doctrine apply and not apply?

A

Will apply where there is general charitable intention

Detailed plans with regard to particular object will mean cy-pres doctrine will not apply

30
Q

What are the three Endacott exceptions whereby a private non-charitable trust will be valid?

A
  • trust for the maintenance of particular animals
  • trusts for the erection and maintenance of monuments and graves
  • trusts for the saying of private masses
31
Q

Are the Endacott exception trusts enforceable?

A

No - although valid they are not enforceable.

32
Q

What happens if the appointed trustee is willing to carry out the terms of the trust?

A

The court will make a Pettingall order.

This requires the trustee to give an undertaking to comply with the trust. If they do not testator’s residuary legatees can sue to enforce the undertaking and prevent a misapplication of the fund.

33
Q

What perpetuity requirements must non-charitable purpose trusts also comply with?

A

They must come to end within 21 years which can be extended with reference to a human life

Trusts Law (16 decks)

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