Trusts 5 Flashcards
In what 3 ways do the rules regarding charitable trusts and express private trusts differ?
- No requirement for certainty of objects/ascertainable human beneficiaries for charitable trusts. * Cy-Pres doctrine applicable to charitable trusts * Rule against perpetuities does not apply to a charitable trust - it may last forever
What are the 3 requirements for a charitable trust?
- The purpose must be charitable (within the definition of the Charities Act 2011)* The trust must bestow an identifiable benefit to the public/a section of the public* The purpose must be wholly and exclusively charitable
What are the 11 qualifying purposes for a charitable trust under the Charities Act of 2011?
- The prevention or relief of poverty* The advancement of education* The advancement of religion* The advancement of health or the saving of lives* The advancement of citizenship or community development* The advancement of the arts, culture, heritage, or science* The advancement of amateur sport* The advancement of human rights, conflict resolution or reconciliation, or the promotion of religious or racial harmony or equality and diversity* The advancement of environmental protection or improvement* The relief of those in need because of youth, age, ill-health, disability, financial hardship, or other disadvantage* The advancement of animal welfare* The 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 and * Other purposes previously recognised as charitable, such as recreational charities, or which fall within the spirit of the purposes listed above or in the old law.
What is the ‘public benefit’ test for charitable trusts?
Assuming a trust falls within the definition in the Charities Act 2011, it must appear that the trust will bestow * an identifiable benefit* to the public or a section of the public.
What does it mean that a charitable trust must benefit ‘the public or a section of the public’?
The purpose must benefit the public in general, or a sufficient cross-section of the public, such as the inhabitants of a particular area. Example: * a trust for a field for sporting activities to promote the health of a particular town’s inhabitants would certainly be valid* one for a field for one family within the town is not.
Can a charitable trust be for the benefit of a group defined by reference to the relationship of the group’s members with a private individual or business?
No, the trust is for a private group and will fail the public interest test (note relief of poverty exception)Example: a trust for the education of the children of the employees of a company will be invalid.
What is the exception to the rule that a charitable trust will fail if it is for the benefit of a group defined by reference to the relationship of the group’s members with a private individual or business?
This rule has not traditionally been applied to trusts for the relief of poverty, so long as the individuals who benefit are not named. Example: a trust for the settlor’s “poor relations” has been held charitable.
What affect can the payment of fees have on a trust’s charitable status?
A charity which charges fees may fail the public benefit test if only those who can afford to pay the fees can benefit. Example: private schools may get around this by having a significant programme to admit children without paying fees, or if it makes its facilities available to the public
Will an incidental benefit to private individuals cause an otherwise valid charitable trust to fail the ‘public benefit’ test
No e.g. provisions in a trust for paying staff who occupy key roles in the charity will not invalidate the trust’s charitable nature.
Would a trust to provide treatment of a particular disease which charges very high fees for treatment qualify as a charitable trust?
No. Although it would benefit the public generally or a sufficient section of the public, the charging of very high fees may in fact limit the benefit only to a small group.
Can a charitable trust have a political purpose?
- Main purpose is political (e.g. campaigning for a change in the law or the dissemination of the ideas of a particular political party): No* Ancillary purpose to main purpose is political: Yes
What is the rationale behind a trust with a political purpose as its main purpose failing the public benefit test?
The court cannot decide that there is a public benefit in one side of a political argument
A trust’s purpose is to help the homeless. In the course of its activities, it campaigns for more low cost housing to be provided. Does this trust satisfy the public benefit test?
Yes. Although this activity is political, it is ancillary to the main purpose of the charity and will not cause it to lose its charitable status.
Does a trust whose main purpose is to seek the repeal of laws allowing the use of animals for medical experimentation satisfy the public benefit test?
No as the main purpose was political. (National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31) 5.2.3
When will a trust with noncharitable purposes satisfy the public interest test?
Only where they are merely incidental to the principal charitable purpose. Charitable trusts must be wholly and exclusively charitable.
An educational charity provides university grants to the children of those living below the poverty line. The charity uses its funds to pay for an annual dinner held for the trustees as thanks for their work. Does this trust satisfy the public benefit test?
Yes . The dinner is an incidental purpose and would not contravene the charitable status of the charity.
If a charitable trust has multiple purposes, is it permissible for some of these to be noncharitable?
No, where a trust contains more than one purpose, each one must be of a charitable nature. * However, if a trust directs trustees to divide gifts between some charitable and some noncharitable objects, the court can sever the charitable part from the noncharitable part and allow the charitable part to take effect.
A trust in a will is for “such charitable or benevolent purposes as my trustees think fit”. Does this trust satisfy the public benefit test?
No. The trust is not a valid charitable trust because “benevolent” purposes are not necessarily charitable (e.g. giving money to a for-profit school may be benevolent because it advances education, but it is not charitable as private investors will receive dividends).
T bequeaths £100,000 to trustees to divide the income into two parts and distribute it “one part to such educational institutions and the other to such worthy individuals as the trustees should select”. Does this qualify as a charitable trust?
The fund may be divided and the first part applied as directed.The second part fails as a private discretionary trust on two grounds: * the objects do not meet the relevant test of certainty (the ‘given postulant test), and* the power to distribute income to worthy individuals can be exercised beyond the period of the Rule Against Perpetuities.
Who enforces charitable trusts?
Attorney General enforces on behalf of the public at large
Can a charitable trust exist perpetually?
Yes
How do the inalienability and remoteness of vesting rules apply in relation to:* private trusts* charitable trusts
Inalienability* Private trusts: prevents the capital of a trust from being held indefinitely while the income is applied for some private purpose. * Charitable trusts: Does not apply. A direction to trustees of a charity to invest the capital and apply the income for the charitable purpose is valid. Remoteness of vesting * Private trusts: Gift must vest within the perpetuity period. * Charitable trusts: Initial gift to a charity must vest within the perpetuity period. However, a gift from one charity to another can take effect at any distance in time.
“To the Newtown YMCA for so long as the premises are used for YMCA purposes, and if the premises shall ever cease to be so used, then to the Newtown Fund for the Relief of Poverty”. Is this charitable trust valid under the remoteness of vesting rule?
Yes under the charity-to-charity exception.
What is the cy-pres doctrine?
Doctrine which permits the court to direct that the trust property be applied to another charitable purpose as close as possible to the original one rather than allowing the trust to fail, where the original charitable purposes of a trust have become impossible or impractical to carry out (e.g. charity closed down):* Initial failure requires a general charitable intention for the doctrine to apply* Subsequent failure does not require a general charitable intention