Trust 6 - Purpose Trust

Question 1

What are charitable and non-charitable purpose trusts exceptions to?

Answer 1

The beneficiary principle

Question 3

What is a charitable purpose trust?

Answer 3

1. Intention to apply property for a charitable purpose
2. Public Benefit Test
3. Be wholly and exclusively charitable

Question 4

What heads of charity are there?

Answer 4

• Prevention of relief or property
• Advancement of education
• Religion
• Health
• Citizenship or community development
• Arts, culture, heritage or science
• Amateur sport
• Promotion of efficiency of armed forces, police etc
• Those in need due to youth, age, ill health etc
• Human rights, equality and diversity
• Animal welfare
• Environmental protection/improvement

Question 5

What does ‘education’ include for charity?

Answer 5

Training, research and broader education

Question 6

What does ‘environment’ include for charity?

Answer 6

Includes conservation of a particular animal, bird etc

Question 7

What does ‘animal welfare’ not include for charity?

Answer 7

Care for particular animals e.g. testator’s pets (can be non-charitable trusts)

Question 8

What can trustees do if there’s uncertainty as to how intention of a charity will be carried out?

Answer 8

They can direct that the property be applied for such charitable purposes as they select

Question 9

Do political objectives count as charitable?

Answer 9

No (although can use political means to achieve a charitable objective)

Question 10

Can charities charge for their services and/or make a profit?

Answer 10

Yes and Yes
Can make a profit if reasonable and necessary

Question 11

When is a charitable trust ‘wholly and exclusively charitable’?

Answer 11

All purposes must be charitable
Cannot pursue political objectives (but can use political means to achieve non-political objectives)

Question 12

What happens if there is a mix of charitable and non-charitable elements for a charitable purpose trust?

Answer 12

• Trust will be void and property returned to settlor unless non-charitable purpose falls within a recognised category of non-charitable purpose trusts
• If non-charitable purpose construed as ‘incidental or subsidiary’, trust remains effective
• If they can be separation, portion of fund allocated to each and trust severed, recognising the charitable trust. Requires that severance was contemplated by the trust AND amount allocated to each purpose to be quantifiable.

Question 13

What are the elements to the public benefit test?

Answer 13

• identifiable benefit
• public / section of the public

Question 14

What is the identifiable benefit test for the public benefit test?

Answer 14

a) Identifiable benefit: must be capable of being identified/described (even if not quantified or measured)

Question 15

What is the public/section of the public test for the public benefit test?

Answer 15

b) Beneficial to public, or section of public,
- not a private class
- must not be negligible in number
- must not depend on relationship to a particular person

Question 16

What is the exception to “must not depend on relationship to a particular person”

Answer 16

• relaxed where the aim is prevention of poverty
• can apply to family members
• can apply to small geographic areas

(must still be a description of poor persons rather than specific poor persons)

Question 17

What is the cypres doctrine?

Answer 17

Where a charitable purpose trust fails, any surplus funds are applied to another charitable purpose by Charity Commission or court scheme (if a general charitable intention is shown)

Question 18

On what grounds can the original purpose of a charitable gift be altered?

Answer 18

1. Original purpose fulfilled or can’t be carried out
2. Original purpose workable but doesn’t provide a use for all property - surplus funds
3. Property from similar trusts combined to be more effective
4. Original purpose for area or class no longer relevant or suitable
5. Purpose has been:
   - adequately provided for,
   OR
   - ceased to be charitable in law,
   OR
   - ceased to provide a suitable method of using property

Question 19

What happens if the charitable gift fails from the outset?

Answer 19

Cy Pres will only apply if there is a general charitable intention

• soup kitchen and cottage hospital = general intention - Cy Pres applied
• detailed plans for rest homes in Hull = no general intention - Cy Pres didn’t apply

Question 20

What non-charitable purpose trusts are allowed?

Answer 20

• particular animals
• monuments and graves - not private individuals
• private masses

Question 21

What should non-charitable purpose trusts include to ensure they comply with rule against inalienability?

Answer 21

An express perpetuity clause

Question 22

What are the requirements for a non-charitable purpose trust?

Answer 22

Intended purpose very certain
1. Fall within recognised exception to beneficiary principle
2. Created by will

Question 23

What are the exceptions to beneficiary principle for non-charitable purpose trusts?

Answer 23

• Trusts for maintenance of particular animals
• Trusts for erection & maintenance of monuments and graves (not private individuals)
• Trusts for saying of private masses (if for public benefit)

Question 24

Can trustees still act on a non-charitable trust?

Answer 24

• if trustee willing to act, a Pettingall order could be made.