Trusts law Flashcards
What is the difference between legal title and equitable title in relation to a trust?
A full legal owner does not have equitable title because they do not need it. They have the full legal and beneficial interest in the property. In a transfer on trust, legal title is transferred to a third party trustee, and a new equitable interest is created for a beneficiary.
What are the different categories of trusts?
Trusts can be categorized as express, resulting, or constructive. Express trusts are intentionally created, while resulting and constructive trusts arise by operation of law.
How is an express trust different from resulting and constructive trusts?
An express trust is deliberately created, while resulting and constructive trusts arise by operation of law and are imposed by the courts.
What are trusts created by operation of law?
Trusts created by operation of law are not intentionally created but instead are a response to particular circumstances which the law considers should give rise to a trust. There are three broad categories of trusts arising by operation of law: resulting trusts, constructive trusts, and statutory trusts.
Who can be a beneficiary in a trust?
The beneficiary in a trust can either be a third party or the settlor.
What are the requirements for creating an express trust?
To create a valid express trust, it is necessary to comply with the three certainties: certainty of intention, certainty of subject matter, and certainty of objects. Additionally, there may be further formalities depending on whether there is a self-declaration or a transfer on trust.
How can a settlor create an express trust?
A settlor can create an express trust through a self-declaration of trust or a transfer on trust. In a self-declaration of trust, the settlor manifests an intention to hold one of their assets on trust for the beneficiary. In a transfer on trust, the settlor transfers property to a third party trustee with the intention that the trustee holds the property on trust for the beneficiary.
What are the two types of resulting trusts?
Resulting trusts can be further subdivided into two key categories: automatic resulting trusts and presumed resulting trusts.
What happens in a self-declaration of trust?
In a self-declaration of trust, the settlor remains the legal owner of the asset but is divested of their beneficial interest in it. The settlor becomes the trustee, holding legal title in a new capacity, while a new equitable interest is created for the beneficiary.
How do automatic resulting trusts and presumed resulting trusts differ?
Automatic resulting trusts are default trusts that arise when a transfer on trust fails, either wholly or partly. Presumed resulting trusts arise when a person makes a gratuitous transfer of property to a third party, and equity raises a presumption that the property should be held on trust for the transferor.
What happens in a transfer on trust?
In a transfer on trust, the settlor transfers property to a third party trustee with the intention that the trustee holds the property on trust for the beneficiary. The trustee becomes the legal owner of the property, and a new equitable interest is created for the beneficiary, who becomes the equitable and beneficial owner.
What is the purpose of automatic resulting trusts?
Automatic resulting trusts ensure that the property returns to its original owner when it is otherwise unclear what should happen to it. They are a default trust that does not respond to the actual intention of the settlor.
Under what circumstances do presumed resulting trusts arise?
Presumed resulting trusts arise when a person transfers their property to someone else, and equity presumes that they intended for the recipient to hold it on trust for them. This presumption can be rebutted by evidence that the transferor did not intend the property to be held on trust for them
What are the different ways to categorize trusts?
Trusts can be categorized as lifetime or testamentary, fixed or discretionary. Lifetime trusts can be both fixed or discretionary, as can testamentary trusts. It is important to note that not all categories are mutually exclusive, and there can be overlap between different categories.
How does a self-declaration of trust differ from a transfer on trust?
In a self-declaration of trust, the settlor remains the legal owner of the asset and becomes the trustee, while in a transfer on trust, the settlor transfers legal title to a third party trustee. Additionally, in a self-declaration of trust, a new equitable interest is created for the beneficiary, whereas in a transfer on trust, the trustee becomes the legal owner and a new equitable interest is created for the beneficiary.
What is the purpose of constructive trusts?
Constructive trusts are imposed to correct unconscionability. They are more complex and varied in nature compared to resulting trusts.
What are institutional constructive trusts?
Institutional constructive trusts are the orthodox form of constructive trust. They are automatically imposed in response to a trigger event that affects the conscience of a legal owner, preventing them from denying the beneficial interest of another person.
What is the role of the settlor in a self-declaration of trust?
In a self-declaration of trust, the settlor manifests an intention to hold one of their assets on trust for the beneficiary. The settlor remains the legal owner of the asset but is divested of their beneficial interest in it.
What are some examples of trigger events for institutional constructive trusts?
Some examples of trigger events for institutional constructive trusts include trusts imposed to prevent fraud, trusts imposed to perfect an imperfect gift or trust, trusts imposed to compel parties to perform a specifically-enforceable contract, and trusts imposed over profits made in breach of fiduciary duty.
When are constructive trusts awarded as a remedy?
Constructive trusts can be awarded by a court as a remedy following misapplication of property in which the claimant can establish an equitable proprietary interest, or property representing the traceable proceeds of a breach of trust or fiduciary duty. This type of constructive trust is not imposed automatically but is the result of a claimant asserting their rights in the property and seeking to claim beneficial ownership of the property or a share of the property.
What are the exceptions to the beneficiary principle in trusts?
Charitable trusts, which have charitable purposes as their objects and are in the public benefit, are exceptions to the beneficiary principle. There are also narrower exceptions known as non-charitable purpose trusts or private purpose trusts.
What are common intention constructive trusts?
Common intention constructive trusts are used to resolve disputes as to beneficial ownership of land where there is no express trust declared over the property. They typically arise in cases where the land is occupied by unmarried couples as a family home or when both individuals are registered as legal owners of the land but there is a dispute about their shares in the land
How does equity determine the equitable interests in common intention constructive trusts?
In common intention constructive trusts, the court assesses the common intention of the parties to determine their respective equitable interests in the land. This is done when there is no express trust declared over the property.
What is the purpose of the Trusts Registration Service (TRS) in relation to trusts?
The Trusts Registration Service (TRS) is an online service operated by HMRC. It is used for the registration of express trusts that have incurred a tax liability in a given year. The trustees are responsible for registration and keeping the information held by the TRS up to date.
A company transfers possession of its goods, but not its title to them, to a man. The company and the man agree that the man will try to sell the goods on behalf of the company and that he will return to the company any goods that he is unable to sell. They also agree that the man will pay the proceeds from any sales into a separate bank account and that he will transfer the sum credited to that account to the company at the end of each week. The man sells some of the goods. He pays the proceeds of sale into a separate bank account.
Which statement best describes the man’s relationship with the company?
The man’s relationship with the company is not fiduciary in nature: it is merely contractual.
The man is an agent for the company.
The man is a trustee for the company.
The man is a bailee for the company.
The man is a bailee, an agent and a trustee for the company.
The man is a bailee, an agent and a trustee for the company.
The man has possession of (but not title to) the company’s goods. This creates the relation of bailor and bailee. The man is authorised to sell goods on behalf of the company. This creates the relation of principal and agent. The man has paid the proceeds of sales into a separate bank account, which he must transfer to the company. This creates the relation of trustee and beneficiary.
Formalities for a trust created over land?
However, declarations of trust over land must comply with s 53(1)(b) of the Law of Property
Act (LPA) 1925. This requires that the declaration of trust must be ‘manifested and proved by
some writing signed by some person who is able to declare such trust’. This means that the
declaration of trust must be evidenced in writing signed by the settlor. If a declaration of trust
over land does not comply with this formality, the trust will be unenforceable
How can lifetime trusts be made?
For lifetime trusts, most declarations of trust can be made orally, although this is not advised
given that the trustees (and possibly the beneficiaries and the court in the case of any future
dispute) will want to refer back to that declaration over the duration of the trust.
What are the two different sets of perpetuity rules?
· The rule against remoteness of vesting.
· The rule against inalienability.
What is the rule against remoteness of vesting?
The rule against remoteness of vesting is a statutory rule which requires that a person (or charity) must obtain a vested interest in the trust property within a recognised ‘perpetuity period’. By s 5(1) Perpetuities and Accumulations Act 2009 this period is 125 years although it is possible for a trust instrument to limit the duration of the trust to a shorter period.
Rule against inalienability?
This rule provides that assets cannot be tied up on trust for longer than the common law perpetuity period of a specified life in being plus 21 years (or just 21 years if no life in being is specified).
Perpetuity rule for Non-charitable purpose trusts?
Rule against inalienability
Perpetuity rule for Trusts with beneficiaries or charitable purposes as objects?
Rule against remoteness of vesting
What are the 3 certainties?
Certainty of intention
Certainty of objects
Certainty of subject matter
Where can someone’s intention be ascertained from?
A person’s intention can be ascertained from their words (spoken or written) and conduct.
Is the word trust necessary for finding intention?
No
Is the word trust conclusive for finding intention?
No
By his valid will, the testator made the following dispositions:
‘1. I give £10,000 to my solicitor to be applied for the benefit of my mother.
I give £10,000 to my wife absolutely, confident that she will do right by our children.’
The executors of the testator’s will have paid £10,000 to his widow and £10,000 to his solicitor.
Which one of the following statements is correct?
The widow holds the money on trust for the testator’s children. The solicitor is the full legal owner of the money.
The solicitor holds the money on trust for the testator’s mother. The widow holds the money on trust for the testator’s children.
The solicitor and the widow are the equitable owners of the money.
The solicitor holds the money on trust for the testator’s mother. The widow is the full legal owner of the money.
The solicitor and the widow are the full legal owners of the money.
The solicitor holds the money on trust for the testator’s mother. The widow is the full legal owner of the money.
The testator has imposed a duty on the solicitor: the money is ‘to be’ applied for the testator’s mother. But the testator has not imposed a duty on the widow: the words ‘confident that she will’ are not imperative.
True or false: Certainty of intention requires the settlor to understand that they are creating a trust.
False
Revisit your materials on Paul v Constance. The settlor does not even need to know what a trust is as long as their intention is consistent with the intention to create a the relationship which is characteristic of a trust.
What are the requirements for certainty of subject matter?
First, it must be possible to identify the trust property (‘the trust property requirement’)
· Secondly, it must be possible to ascertain the beneficiary’s interest in the trust property (‘the beneficial entitlement requirement’)
True or false: Only land and chattels can be held on trust.
False
By his valid will, the testator (deceased) made the following disposition:
‘I give to my trustees my favourite car on trust for my daughter, and the sum credited to my current bank account on trust to give most of it to my daughter and the balance to my son.’
There is no available evidence of which car was the testator’s favourite.
Which one of the following statements best describes the effect of the disposition?
The trustees are entitled to full legal ownership of a car and of the sum credited to the testator’s bank account.
The testator has created a valid trust of the sum credited to his bank account but has not created a valid trust of a car.
The testator has not created a valid trust.
The testator has created a valid trust of his favourite car and of the sum credited to his bank account.
The testator has created a valid trust of his favourite car but has not created a valid trust of the sum credited to his bank account.
The testator has not created a valid trust.
The intended trust of the car is void because it is not possible to identify which car was the testator’s favourite. The intended trust of the sum credited to the bank account is void because it is not possible to identify the beneficiaries’ beneficial entitlements – ‘most’ is too vague.
Q
The owner of 20 ordinary shares in a private company and 20 bars of gold bullion orally declares herself a trustee of 10 of the shares and 10 of the bars for a beneficiary. She does not segregate or otherwise identify the 10 shares or the 10 bars which are to form the subject matter of the trust.
Which one of the following statements best describes the effect of the declaration?
Neither the shares nor the bars are subject to a trust.
There is a valid trust of 10 shares and 10 bars.
There is a valid trust of 10 shares and 20 bars.
There is a valid trust of 10 bars but no trust in respect of the shares.
There is a valid trust of 10 shares but no trust in respect of the bars.
There is a valid trust of 10 shares but no trust in respect of the bars.
A person can declare a trust of x shares out of a larger number of such shares without identifying which x shares are to form the subject matter of the trust, provided that they are all shares of the same type and in the same company: Hunter v Moss [1994] 1 WLR 452. However, there is not a trust of any of the bullion because a person cannot declare a trust of x physical items out of a larger number of such items without identifying the particular x items which are to form the subject matter of the trust: In re Goldcorp [1995] 1 AC 74.
What is the test for certainty of object for fixed trusts?
The test of certainty applying to fixed trusts is the complete list test (which requires conceptual and evidential certainty)
Under this test,
it must be possible to draw up a complete list of each and every beneficiary.
What is the test for certainty of objects for discretionary trusts?
The test of certainty applying to discretionary trusts and fiduciary powers is the is/is not test
In order to satisfy the test,
we need conceptual certainty – is the description of the class (amongst whom the trustees will
exercise their discretion) clear and objective? If the language used to describe the class is
unclear and lacks precision (ie the trustees cannot say with certainty what sort of person they
are looking for), then the trust will fail.
Could a discretionary trust fail for administrative unworkability?
Yes
By his valid will, the testator made the following disposition: ‘I give £10,000 to my trustees to be distributed between my children and my friends in such shares as my trustees shall determine.’ The executors of the testator’s will have paid £10,000 to the trustees.
Which one of the following describes the trustees’ position in relation to the £10,000?
The trustees may keep the money for their own benefit.
The trustees must distribute the money amongst the testator’s children.
The trustees must distribute the money amongst the testator’s friends.
The trustees hold the money on a resulting trust for the testator’s estate.
The trustees must distribute the money amongst the testator’s children and friends.
The trustees hold the money on a resulting trust for the testator’s estate.
The discretionary trust is void for uncertainty due to the inclusion of a conceptually uncertain term (‘friends’) in the description of the class of objects. As a result, the trustees hold the money on resulting trust for the testator’s estate.
By his valid will, the testator made the following disposition: ‘I give £10,000 to my trustees. £5,000 is to be distributed to my children, and £5,000 is to be distributed to British men, in such shares as my trustees shall determine.’ The executors of the testator’s will have paid £10,000 to the trustees.
Which one of the following describes the trustees’ position in relation to the £10,000?
The trustees hold £5,000 on discretionary trust for the testator’s children and £5,000 on resulting trust for the testator’s estate.
The trustees hold £5,000 on discretionary trust for the testator’s children. They may keep the other £5,000 for their own benefit.
The trustees hold £5,000 on discretionary trust for British men and £5,000 on resulting trust for the testator’s estate.
The trustees hold £5,000 on discretionary trust for the testator’s children and £5,000 on discretionary trust for British men.
The trustees hold £10,000 on resulting trust for the testator’s estate.
The trustees hold £5,000 on discretionary trust for the testator’s children and £5,000 on resulting trust for the testator’s estate.
The discretionary trust for the children is valid but the discretionary trust for British men is void for administrative unworkability, because the class of objects is too large. As a result, the trustees hold £5,000 on resulting trust for the testator’s estate.
True or false: Evidential uncertainty in connection with the objects of a trust is fatal to all types of trust.
False
Although evidential uncertainty is fatal to some trusts – e.g. fixed trusts involving equal distribution amongst the members of a class – it is not fatal to all trusts: Re Baden’s Deed Trusts (No 2) [1973] Ch 9.
A woman declares a trust of three of her five paintings, and 100 of her 200 ordinary shares in a private company, in favour of a man. The woman does not segregate or otherwise identify the three paintings or the 100 shares to be held on trust.
Which statement best describes the effect of the woman’s declaration?
The woman holds three paintings on trust for the man. She remains the full legal owner of the other two paintings and all the shares.
The woman holds 100 shares and three paintings on trust for the man. She remains the full legal owner of the other 100 shares and two paintings.
The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
The woman holds 100 shares on trust for the beneficiary. She remains the full legal owner of the other 100 shares. She holds the paintings on a resulting trust for herself.
The woman does not hold any shares or paintings on trust for the man. She remains the full legal owner of all the shares and paintings.
The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
Certainty of subject matter comprises two requirements. The first requirement is the trust property requirement: it must be possible to identify the trust property. The woman has failed to identify the three paintings to be held on trust and, as a result, it is not possible to identify the trust property. By contrast, the woman’s failure to identify the 100 shares to be held on trust is not fatal because a person can declare a valid trust of x of their (x+y) shares of the same type in the same company without identifying the x shares to be held on trust.
A testator’s validly executed will contains the following clause:
“My trustees shall hold my engagement ring and my wedding ring on trust until my daughter reaches the age of 21. She may then choose one of the rings for herself. After my daughter makes her choice, my trustees shall give the other ring to my niece.”
The testator’s daughter dies before reaching the age of 21. The niece is still alive.
Which one of the following statements is the best advice to the trustees as to the niece’s entitlement to a ring under the testator’s will?
The niece is not entitled to either ring.
The niece is entitled to a ring chosen by the trustees.
The niece is entitled to the ring of her choice.
The niece is entitled to both rings.
The niece is entitled to a ring chosen by the court.
The niece is not entitled to either ring.
The intended trust fails for uncertainty of subject matter, specifically beneficial entitlement as in the case of Boyce v Boyce. There was a mechanism for determining beneficial entitlement but that mechanism can no longer be used because the daughter died without making her choice.
A woman recently died. Her valid will contains the following clauses:
‘1. I give £10,000 to my trustees to be distributed amongst my children in such shares as my trustees shall determine.
I give £10,000 to my trustees to pay an ample sum to my brother.’
Which statement best describes the status of the trusts in clauses 1 and 2?
The trusts in clauses 1 and 2 are void.
The trustees can determine whether the trusts are valid or void.
The trust in clause 1 is valid but the trust in clause 2 is void.
The trusts in clauses 1 and 2 are valid.
The trust in clause 2 is valid but the trust in clause 1 is void.
The trust in clause 1 is valid but the trust in clause 2 is void.
Certainty of subject matter comprises two requirements. The second requirement is the beneficial entitlement requirement: it must be possible to ascertain the nature and extent of the beneficiary’s interest in the trust property. In relation to clause 1, it is possible to ascertain the extent of each beneficiary’s interest by reference to the trustees’ determination. However, in relation to clause 2, it is not possible to ascertain the extent of each beneficiary’s interest because ‘ample sum’ is an uncertain measure. (How much is an ‘ample sum’?) As a result, the trust in clause 2 is void for uncertainty of subject matter.
A woman recently died. Her valid will contains the following clause:
‘I give £10,000 to my husband absolutely. I trust him to use it fairly vis-à-vis our children.’
The executor of the woman’s will has paid £10,000 to her husband.
Which statement best describes the husband’s position in relation to the £10,000?
The husband is the full legal owner of the money.
The husband holds the money on a discretionary trust for the children.
The clause is void and the husband receives nothing.
The husband holds the money on a fixed trust for the children.
The husband holds the money on a fixed trust for himself and the children.
The husband is the full legal owner of the money.
The £10,000 is given to the husband ‘absolutely,’ which is consistent with a gift. The words ‘I trust him to’ are not sufficiently imperative to impose a duty (a trust) in relation to the money. This is supported by the fact that the content of any supposed duty – the ‘fair’ use of the money – is entirely vague
Can the phrase “to distribute” create a trust?
Yes
What types of words are needed to create a trust?
Precatory words express a wish, hope or expectation. Such words do not create a trust. Instead it is likely that that person will be deemed to have made a gift.
Obligatory or mandatory wording must be used if the settlor is looking to create a trust.
(a) Iesha says to Janet, ‘I am giving you my wedding ring in the hope that you will look after
it for Katherine’. This does not impose a trust on Janet. There is no duty to look after the
ring for someone else, merely an expectation that Janet will do so. As a result, all that
Iesha is doing is gifting the ring to Janet, who becomes the absolute owner of the ring.
(b) Lionel says to Mark, ‘I give you my collection of Grayson Perry vases trusting that you
will give a vase to each of my children’. Notwithstanding that Lionel uses the word
‘trusting’, this imposes no trust on Mark. All that Lionel is doing is expressing a hope orexpectation that Mark will distribute vases to his children. This is precatory wording. As a
result, Lionel is taken to have gifted the vases to Mark, who takes those vases absolutely.
What is administrative unworkability?
A discretionary trust will be
administratively unworkable, and therefore invalid, if the class is so hopelessly wide as ‘not to
form anything like a class’
What are the formalities for express trusts of land?
Section 53(1)(b) is an evidential requirement only. The trust will be valid but unenforceable unless and until it is ‘manifested and proved’ in signed writing.
If the trust is never evidenced in signed writing, it will remain unenforceable, subject to anything rendering it unconscionable to deny the interest of the beneficiary (such as proprietary estoppel or the imposition of a constructive trust).
If a trustee receives land to hold on a trust which has not been evidenced in writing, and the settlor is unable or unwilling to provide this evidence, it would be prudent for the trustee to seek directions from the court as to their obligations.
True or false: Section 53(1)(b) LPA 1925 only applies to declarations of trusts of land.
True
What is the effect of failure to comply with section 53(1)(b) LPA 1925?
The trust is unenforceable
Which of the following trusts would be unenforceable?
A person sends their sibling a signed letter declaring that they now hold their house on trust for the sibling. The letter contains the terms of the trust.
A person orally declares that they are holding their house on trust for their sibling and then leaves their sibling a voicemail to confirm the terms of the trust
A person sends a signed letter to their friend to inform them that they will be transferring their house to the friend, to hold on trust for the person’s sibling. The letter contains the terms of the trust. The person then effects the legal transfer of the house.
A person orally declares themselves to be holding their house on trust for their sibling and then sends the sibling a signed letter to confirm the terms of the trust.
A person calls their friend to inform them that they will be transferring their house to the friend to hold on trust for the person’s sibling. After the legal transfer has been effected, the person sends a signed letter to the friend confirming the terms of the trust.
person orally declares that they are holding their house on trust for their sibling and then leaves their sibling a voicemail to confirm the terms of the trust
This trust does not satisfy the requirements of s53(1)(b) LPA 1925 as there is no signed, written evidence of the tr
Is constitution of trust necessary to make a transfer of trust binding?
Yes
Is constitution of trust necessary to make a self declaration of trust binding?
A self declaration of trust does not require any movement of the legal title as legal title to the property is already vested in the settlor. This means that the trust is automatically constituted when the trust is declared.
What is constitution of trust?
Constitution refers to the transfer of legal title from one party to another.
Failed constitution?
If trust property is not vested in the trustees, the trust is incompletely constituted and is therefore void.
If legal title is not transferred correctly then the disposition will fail. Under Milroy v Lord equity will not assist a volunteer, perfect an imperfect gift or treat a failed gift as a self declaration of trust.
Testamentary trust constitution?
If a trust is created in a will (a testamentary trust)then constitution will take place via the will. After the death of the testator, their personal representatives must obtain legal title to the testator’s estate.
What is an inter vivos trust?
A lifetime trust
Constitution for registered land?
Registered Land transfers must be made by deed under s52(1) LPA 1925 and registered with the Land Registry under s 27 LRA 2002. Legal title passes on registration of the new owner at the Land Registry
Constitution for shares?
Shares in a private company are transferred by the transferor signing a stock transfer form and sending it to the company. (It is also common for the company to require the share certificate or an indemnity in respect of the transferor’s ownership as part of this process.) Legal title passes when the transferee is registered in the company’s internal register of members.
Constitution for choses in action?
Choses in action (eg debts and money in a bank account) are transferred by notice in writing to the debtor or to the bank (see s 136 LPA 1925). Legal title passes once notice has been received.
Constitution for chattels?
Chattels (including physical cash) may be transferred either (i) by deed of gift or (ii) by delivery of the chattel with evidence of the transferor’s intention to transfer it (Re Cole 1964 CH 175).
Constitution for cheques?
Cheques (and other bills of exchange) in favour of the transferor may be transferred to a third party (i.e. someone other than the named payee) by the transferor endorsing the cheque by signing their name on the back according to the Bills of Exchange Act 1882.
What constitutes as an inter vivos gift?
To constitute an inter vivos gift, legal title must transfer from the donor to the donee.
A father writes to his daughter declaring himself to be holding his house on trust for his daughter. He signs the letter and sends it to his daughter.
Has this trust been validly constituted?
No. The transfer of beneficial ownership to the daughter must be registered with the land registry for the trust to be constituted.
No. In order to constitute a trust of land, the declaration of trust must be made by deed. Until this occurs, the trust is not constituted and so it is void.
Yes. In order to constitute a trust of land, the trust must be declared in writing and signed by the settlor. As the father has signed the letter, this means the trust has been constituted correctly.
Yes. As this is a self-declaration of trust there is no movement of legal title and so the trust is automatically constituted when it is declared by the father.
No. The trust has not been constituted because the letter has not yet been received by the daughter. Until she has signed evidence of the declaration of trust, the trust is void.
Yes. As this is a self-declaration of trust there is no movement of legal title and so the trust is automatically constituted when it is declared by the father.
The settlor is declaring himself a trustee and so legal title to the property is already vested in him and the trust is automatically constituted. Note the formality requirement of s53(1)(b) LPA 1925 which requires a declaration of a new trust of land to be evidenced in signed writing. This is also satisfied here.
A man wanted to gift shares to his brother. He completed a stock transfer form in favour of his brother intending to post it to him the next day. However, the man died unexpectedly that night. The man’s validly executed will leaves the shares to his sister.
Which of the following correctly explains what will happen to the shares?
Although the man intended to make a gift of the shares it was not fully constituted before his death and so the gift is imperfect. His sister will inherit the shares under the will.
The gift was constituted when the man completed the stock transfer form. The brother is the legal owner of the shares.
The gift was constituted when the man completed the stock transfer form but, as this has not been communicated to his brother, the gift is imperfect. His sister will inherit the shares.
The brother is the legal owner of the shares but holds them on trust for the sister.
The brother is the beneficial owner of the shares. Completion of the stock transfer form can be interpreted as a self-declaration of trust over the shares.
Although the man intended to make a gift of the shares it was not fully constituted before his death and so the gift is imperfect. His sister will inherit the shares under the will.
In order to transfer legal title, the man should have sent the signed stock transfer form and share certificate to the Company’s registrar under s1 of the Stock Transfer Act 1963. Legal title would pass on registration of the brother as shareholder. As this has not occurred, the gift is imperfect. Equity will not perfect an imperfect gift under the rule in Milroy v Lord or assist the brother as a volunteer.
What are the exceptions to the rule in Milroy v Lord?
Principle in Re Rose
2.The unconscionable principle
Fortuitous Vesting
Donationes Mortis Causa
When does Re Rose apply?
· Re Rose applies if (1) the correct method of transfer is used (2) the transferor has done everything in their power to effect the transfer and (3) the documentation ends up in the hands of the person/organisation capable of effecting the transfer.
How does Mascall v Mascall extend Re Rose
Mascall v Mascallextends the_Re Rose_ principle to registered land and says that the second limb of Re Rose is not necessary if the transferor has ‘put the matter beyond their control’ as this make would make a transfer irrevocable.
· If Re Rose or Mascall v Mascallapply the donor will hold the property on a constructive trust for the intended donee.
What is fortuitous vesting?
*Fortuitous vesting is also known as the rule in Strong v Bird and it operates where a gift is made to a donee who subsequently obtains legal title to it by becoming the donor’s personal representative.
When does fortuitous vesting operate?
*In order for the rule in Strong v Bird to operate there must be a continuing intention to make an immediate gift to the intended donee who becomes the executor/one of the executors under the donor’s will.
if the conditions in Strong v Bird (1874) LR 18
Eq 315 are satisfied:
(a) the settlor intended to create an immediate trust with a third party acting as trustee;
(b) that trust was not immediately created due to a failure to comply with a relevant
transfer rule;
(c) the settlor’s intention continued up to their death; and
(d) the intended trustee acquired legal title to the trust property by becoming the settlor’s
executor or administrator.
The unconscionable principle?
*Pennington v Waine appears to create an exception permitting perfection in cases where it would be ‘unconscionable’ to resile from the transfer.
Donationes mortis causa?
Donationes mortis causa are recognised in exceptional circumstances where a donor anticipates dying and wants to make a gift but does not have time to make a valid will.
When is a valid donatio mortis causa recognised?
A valid donatio mortis causa will be recognised where the donor is contemplating their imminent death, expresses the intention that the gift is conditional on their death and parts with dominion of the property.
A man tells his wife that he will transfer shares to her. He completes a stock transfer form and sends it with the share certificate to the company’s registrar. The man dies and the shares are still registered in his name.
Can the wife claim beneficial ownership of the shares?
No. Although she may have had a beneficial interest in the shares under Re Rose whilst the man is alive, this will not survive his death.
Yes. Pennington v Waine will apply in this situation. The man has promised his wife that he will transfer the shares and so it would be unconscionable to go back on this.
Yes. Milroy v Lord provides that equity will always treat a failed gift as a self-declaration of trust.
No. Legal title passes on registration of the shares into her name. As this has not occurred before the man’s death, equity cannot perfect this imperfect gift.
Yes. Re Rose is likely to perfect the imperfect gift.
Yes. Re Rose is likely to perfect the imperfect gift.
The correct method of transfer is used, the man has done everything in his power to effect the transfer and the documentation has ended up in the hands of the organisation capable of effecting the transfer i.e. the company’s registrar. Under Re Rose the wife will have a beneficial interest in the shares under a constructive trust and can force the transfer of legal title to her.
A woman wanted to give her house to her adult son. She completed a transfer deed and gave this to her solicitor who said he would finalise the gift on his return from holiday in two weeks’ time. The woman died the next day and in her validly executed will the house was left to her boyfriend.
Will the son be able to claim a beneficial interest in the house?
Yes. Milroy v Lord provides that equity will always treat a failed gift as a self-declaration of trust. The woman is treated as holding the house on trust for her boyfriend as soon as she expresses the intention to make a gift.
No, because the woman has used the wrong method of transfer.
No, the house will pass to her boyfriend. The Re Rose exception to Milroy v Lord will not apply because the woman has not put the matter beyond her own control.
Yes. The Re Rose exception to Milroy v Lord will apply because the woman has put the matter beyond her control.
Yes. The Re Rose exception to Milroy v Lord will apply because the woman completed the correct m
No, the house will pass to her boyfriend. The Re Rose exception to Milroy v Lord will not apply because the woman has not put the matter beyond her own control.
Re Rose will not apply because, whilst she used the correct method of transfer (a deed under s52(1) LPA 1925) this has not yet been sent to the land registry and so has not ended up in the hands of the person capable of effecting the transfer. Instead, the transfer documentation is with her own agent (her solicitor); an extension of herself. Therefore, she has not done all within her power to effect the transfer under Re Rose. Nor has she put the matter beyond her control as in Mascall v Mascall.
True or false: The rule in Re Rose can be used to perfect imperfect gifts but not to perfect imperfect trusts.
False
True or false: If a person dies after expressing an intention to make a gift but before delivering the asset to the donee, equity will perfect the imperfect gift as long as the donor did not change their mind before they died.
False
It is not sufficient that the donor’s intention remained unchanged before their death. The gift must either be conditional upon death and satisfy the requirements of a donatio mortis causa, or it must be intended to be immediate and satisfy the requirements of Strong v Bird.
A man wishes to give a five-acre paddock to his adult granddaughter to open a riding stable. The man’s solicitor completes the transfer documentation, but the man then dies unexpectedly before the granddaughter is registered as the owner. In the man’s validly executed will, his grandson is due to inherit the land. The granddaughter and her sister are appointed executors.
Can the granddaughter claim beneficial ownership of the land?
No. The rule in Strong v Bird will not apply because she is not the only executor.
Yes but she can only claim a beneficial share in half the land because there is another executor.
Yes, because her grandfather made the gift shortly before his death, meaning that it was a donatio mortis causa.
Yes, under the rule in Strong v Bird.
No, because she was not registered as the legal owner before the grandfather’s death.
Yes, under the rule in Strong v Bird.
The requirements for Strong v Bird are satisfied. There is a continuing intention to make an immediate gift and the intended donee is one of the executors of the donor’s will (Re Stewart).
A professional musician decided to give her prized cello to her niece on her retirement. She took her niece out to lunch to announce the news, promising that she would arrange delivery as she played her last concert later that month. The woman died in an accident later that day. Her validly executed will, in which her niece was named executor, left all her instruments to a youth orchestra.
Who owns the cello?
The cello will go to the youth orchestra under the cellist’s will. Strong v Bird will not apply as the cellist does not intend to make an immediate gift.
The cello will go to the youth orchestra because the cellist did not contemplate her immediate death when attempting to make the gift and so the rule in Strong v Bird will not apply.
The cello will go to the niece who will be able to claim it under the rule in Strong v Bird because the cellist’s intention remained unchanged at her death.
The cello will go to the niece who will be able to claim it under the rule in Strong v Bird because the cellist had a continuing and immediate intention to make a gift.
The cello will go to the youth orchestra under the cellist’s will. The rule in Strong v Bird will not app
The cello will go to the youth orchestra under the cellist’s will. Strong v Bird will not apply as the cellist does not intend to make an immediate gift.
Although there is continuing intention to make a gift (see Re Gonin) and the intended donee is the executor of the donor’s estate (Re Stewart), the cellist does not intend to make an immediate gift. The facts are analogous with Re Freeland. The cellist intends to give the cello in the future. As such, there is no intention to make an immediate gift of the cello and so this would prevent the operation of fortuitous vesting.
How to transfer legal title to third party trustee over land?
If land is part of the trust fund, in order to transfer legal title to a third party trustee, the
settlor must:
(a) execute a deed (LPA 1925, s 52). A deed is a document that satisfies s 1 of the Law of
Property (Miscellaneous Provisions) Act 1989, ie:
(i) the document is stated to be a deed or is stated to be signed as a deed; and
(ii) the person making the deed signs the document in the presence of a witness who
also signs it.
Where the land is registered (which most land now is), Form TR1 is used – this satisfies
the above definition; and
(b) give the executed deed either to the trustee (who will then pass it on to Land Registry) or
send it to Land Registry direct.
Land Registry will then register the trustee as the new legal owner.
Legal title is not transferred until all steps have been completed and the trustee is the new
registered proprietor of the land.
How can legal title for shares be transferred?
Legal title in company shares can be transferred either:
(a) within the CREST system – this only applies to certain shares in public quoted companies; or
(b) outside the CREST system – this applies to all other shares, especially shares in private
companies.
How to transfer shares outside of crest system?
Transferring shares outside the CREST system
For all other shares (especially in private companies – those companies whose names end
in ‘Ltd’ or ‘Limited’), paperwork is required. The owner of such shares will have a share
certificate as evidence of their ownership, and that ownership is confirmed by the name of the
owner being entered in the company’s register of members.
If private company shares are to be part of the trust fund, in order to transfer legal title to a
third party trustee, the settlor must:
(a) execute a stock transfer form – usually the settlor will execute the stock transfer form set
out in Sch 1 of the Stock Transfer Act 1963; and
(b) give the executed stock transfer form and relevant share certificate either to the trustee
(who will then pass it on to the relevant company) or send it to the company direct.
The company’s secretary will then register the trustee as the new shareholder (and therefore
the new legal owner) in the register of members.
Legal title is not transferred until all steps have been completed and the trustee is the new
registered shareholder.
How is transfer of legal title for money and chattels done?
Through delivery
The ‘every effort’ test?
Where the settlor did everything they could to transfer legal title, the transfer may be
regarded as complete in equity even though the transfer of legal title has not yet been
completed. In order to take the benefit of this exception it is often said that the settlor must
have passed the point of no return or put the property being transferred ‘beyond recall’. The
settlor must have completed all the steps they were required to take, ie the settlor took steps
to properly execute and send out all documents relating to the transfer of the property. All that
remains for the transfer to be completed is the act of a third party.
What is the beneficiary principle
a trust must have a beneficiary
Beneficiaries in a fixed trust?
The trustees of a fixed trust have no distributive discretion. Beneficial entitlement is determined by the settlor.
Successive interest trusts?
Successive interest trusts involve a series of interests in the same trust property. A common example is a life interest trust. The lifetime beneficiary (or “life tenant”) is entitled to the income during their lifetime, after which the remainder beneficiary (or “remainderman”) is entitled to the capital.
Trustees of a discretionary trust?
The trustees of a discretionary trust must exercise the power but have a distributive discretion. The objects are determined by the settlor but the trustees have the discretion to determine how to distribute amongst that class of objects.
Power of appointment?
The donee of a power of appointment has no obligation to exercise it (although if it is a fiduciary power they must periodically consider it). The objects are determined by the donor and the donee has the power to determine whether and how to distribute.
True or false: The trustees of a fixed trust have a distributive discretion.
False
True or false: The objects of a discretionary trust have proprietary rights in the trust property.
FALSE
The objects of a discretionary trust are only potential beneficiaries. They have no equitable interest in the trust property until the discretion is exercised in their favour
What is a vested interest?
A vested interest is a current right to property. Nothing more needs to happen for the beneficiary to become entitled to the property.
What is a contingent interest?
A contingent interest is conditional upon the occurrence of an uncertain future event. Contingent interests become vested if the condition is satisfied. The beneficiary has no entitlement unless and until the condition is satisfied.
What does vested in possession mean?
A beneficiary whose interest is ‘vested in possession’ has a current right to current enjoyment of the property.
What does vested in interest mean?
A beneficiary whose interest is ‘vested in interest’ has a current right to future enjoyment of the property.
What is the rule in Saunders v Vautier?
The basic principle in Saunders v Vautier is that a sole adult beneficiary of sound mind, with a vested interest in the trust property, is entitled to direct the trustee to transfer legal title to them, thereby bringing the trust to an end early.
· They could alternatively direct the trustees to transfer legal title to a third party.
Can the rule in Saunders v Vautier be exercised by trusts with multiple beneficiaries?
The rule in Saunders v Vautier can be exercised by trusts with multiple beneficiaries.
In a simple fixed trust, without successive interests, each beneficiary can sever their share of the capital without affecting the interests of others.
In the case of more complex trusts, where shares cannot be severed, Saunders v Vautier can only be exercised if all the beneficiaries are adults of sound mind who agree to collapse the trust. This includes beneficiaries with contingent interests and the objects of discretionary trusts.
Can Saunders v Vautier rights be exercised to interfere with the administration of the trust?
The beneficiaries cannot use Saunders v Vautier to interfere in the administration of the trust. They can either collapse the trust (and settle the property on a new trust if they choose to) or leave the trustees to carry out their obligations.
True or false: Only beneficiaries with vested interests in the trust property have Saunders v Vautier rights.
False
Although only beneficiaries with vested interests can exercise Saunders v Vautier alone, the rule can be exercised together by adult beneficiaries providing they all agree.
A trustee holds property on trust for A for life, remainder to B (age 18) and C (age 16). A, B and C (all of whom are of sound mind) wish to use the rule in Saunders v Vautier to collapse the trust and divide the property equally between them.
Which one of the following is correct:
A can exercise Saunders v Vautier immediately because their interest is vested in possession. B and C cannot exercise Saunders v Vautier until their interests vest in possession.
A cannot exercise Saunders v Vautier because they do not have a right to the capital. B and C must wait until A dies before they can collapse the trust.
A, B and C can collapse the trust and share the property equally now.
A and B can take their shares of the trust property now. C must wait until they reach the age of 18.
A, B and C cannot collapse the trust until C reaches the age of 18.
A, B and C cannot collapse the trust until C reaches the age of 18.
C is not yet an adult so cannot exercise Saunders v Vautier rights. Due to the nature of the trust, it is not possible to sever A and B’s shares.
Bare trust?
A trust for a sole, adult, mentally capable beneficiary that gives the beneficiary a vested
interest is called a ‘bare trust’. The beneficiary of a bare trust is often said to be ‘absolutely
entitled’.
The extended rule of Saunders v Vautier?
The beneficiaries can end the trust by calling for a transfer of trust property to themselves
or other trustees, so long as all the beneficiaries under the trust who could possibly become
entitled:
(a) are in existence and ascertained;
(b) are aged 18 years or over and have mental capacity; and
(c) agree to what is being proposed.
What are the exceptions to the beneficiary principle?
Charitable purpose trusts are recognised despite the absence of ascertainable beneficiaries because they are for the public benefit.
Non-charitable purpose trusts have been recognised as valid in specific, exceptional cases. These are known as the ‘Endacott’ exceptions.
What are the benefits of charitable status?
· No requirement to comply with the beneficiary principle
· More flexible rules on certainty of objects (i.e. certainty of purpose)
· No limit on their duration (i.e. they can exist in perpetuity)
· A rule known as the cy-près doctrine which allows the trust property to be applied for other charitable purposes even if the specific trust fails
· Tax benefits: These are outside the scope of the module but are a major practical advantage to having charitable status.
What are the requirements for a charitable trust?
To have charitable status a trust must:
Be for a charitable purpose
Satisfy a public benefit test
Be wholly and exclusively charitable
What are the rules on certainty of purpose for charitable trusts?
· 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.
· The Charity Commission or the court can provide a “scheme” to specify the charitable purposes the property should be applied to.
Which statement best describes the effect of a non-charitable purpose trust having an uncertain purpose?
The trustees can make an application to court for scheme of administration setting out how to administer the trust.
The trust is likely to be void.
The trustees can use their discretion to interpret the purpose as they see fit.
The court will strive to interpret the purpose as being sufficiently certain if it is possible to do so.
The trustees should carry out the elements of the purpose which are certain and disregard elements of the purpose which are uncertain
The trust is likely to be void.
Which statement is correct in relation to the perpetuity requirements applying to non-charitable purpose trusts?
Non-charitable purpose trusts are not subject to perpetuity restrictions provided the purpose falls within a recognised exception to the beneficiary principle.
Non-charitable purpose trusts are subject to the 21-year common law perpetuity period.
Non-charitable purpose trusts are subject to the 125-year common law perpetuity period.
Non-charitable purpose trusts are subject to the 25-year common law perpetuity period.
Non-charitable purpose trusts are subject to the 125-year perpetuity period under the Perpetuities and Accumulations Act 2009.
Non-charitable purpose trusts are subject to the 21-year common law perpetuity period.
Which of the following statements best describes the fundamental importance of the requirement for certainty in a non-charitable purpose trust?
The purpose must be so clearly defined that if the trustees surrendered their discretion the court could carry out the purpose.
The purpose must be so clearly defined that the beneficiaries can enforce the trust.
The purpose must be so clearly defined that the beneficiaries can understand the nature of their rights under the trust.
The purpose must be so clearly defined that the trustees can interpret the purpose in a reasonable way.
The purpose must be so clearly defined that the trust can be administered in accordance with the wishes of the testator.
The purpose must be so clearly defined that if the trustees surrendered their discretion the court could carry out the purpose.
What is required for a charitable purpose?
· falls within section 3(1); and
· is for the public benefit.
What is is s 3(1) for charitable purpose?
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
What does poverty mean for The prevention or relief of poverty?
Poverty means “going short”
The purpose must not benefit the rich: Otherwise it will not be “wholly and exclusively charitable” - see Re Gwyon in which a trust for the provision of clothing to boys was void on the basis that it did not require the boys to be poor and so would benefit rich boys too.
Poverty can be inferred: For example, the provision of a soup kitchen was implicitly for the alleviation of poverty (Biscoe v Jackson). In contrast,, a trust to provides dwellings for the “working classes” was not charitable as “working class” did not indicate poor persons (Re Sanders’ WT).
Poverty can be temporary: The Charity Commission’s decision to grant charitable status to the AITC Foundation which provided relief for those who suffered as a result of the collapse of investment companies noted that “someone suffering a temporary period of financial__hardship due to a sudden change in circumstances might also__be eligible for assistance”.
The advancement of education?
The Charity Commission guidance also recognises that a wide range of organisations class as charitable under this heading, including:
* museums, galleries, libraries, scientific institutes
* pre-schools, playgroups, summer schools and homework clubs
* organisations supporting the work of educational establishments such as parent-teacher associations, teacher training organisations or exam boards
* organisations providing life skills training such as the Duke of Edinburgh award schemes, Scouts and Guides
The advancement of religion?
“religion” includes:
· a religion which involves belief in more than one god, and
· a religion which does not involve a belief in a god.
Charity Commission guidance consolidates further case law requirements describing a religious belief as follows:
· belief in a god (or gods) or goddess (or goddesses), or supreme being, or divine or transcendental being or entity or spiritual principle (“supreme being or entity”) which is the object or focus of the religion
· a relationship between the believer and the supreme being or entity by showing worship of, reverence for or veneration of the supreme being or entity
· a degree of cogency, cohesion, seriousness and importance
· an identifiable positive, beneficial, moral or ethical framework.
Trusts for the following purposes have also been found to fall within this head:
· Support of a religious order such as a monastery or convent (Re Banfield)
· Public masses celebrating the dead (Re Hetherington)
· The repair of churchyards or burial grounds (Re Douglas)
The advancement of health / saving of lives?
The Charity Commission takes a broad view of advancing health including complementary, alternative or holistic methods as well as conventional methods, though to be charitable there must be sufficient evidence for the claimed benefits of the method used (see Charity Commission Operational Guidance (OG) 304).
The relief of the sick has long been considered charitable. It can include, for example, the provision of hospitals (Re Resch’s Will Trust) or healthcare advice (British Pregnancy Advisory Service).
The saving of lives includes rescue services such as lifeboat associations, mountain rescue and cave rescue.
Citizenship / Community development?
Section 3(2)(c) provides that this head includes:
· rural and urban regeneration
· the promotion of civic responsibility, volunteering, the voluntary sector or the effectiveness or efficiency of charities.
As always, the purpose must be wholly and exclusively charitable. This was demonstrated in _IRC v Oldham Training and Enterprise Council_where an organisation was held not to be a charity because, in addition to providing vocational training for the unemployed, it also promoted trade, commerce and enterprise and provided advice to new businesses
Arts, culture, heritage or science?
Charity Commission guidance provides that to be charitable the art needs to be of “merit”, the assessment of which may require expert evidence.
Monuments can be charitable under this head if they are of cultural or historical importance. Monuments to private individuals are therefore unlikely to be charitable (but may be recognised as a non-charitable purpose trust).
Charity Commission guidance provides that “heritage” might be regarded as part of a country’s local or national history and traditions which are passed down through successive generations. It includes charities for the preservation of historic land and buildings and might also include activities concerned with preserving or maintaining a tradition (where the benefit to the public in preserving it can be shown).
The advancement of amateur sport?
Section 3(2)(d) of the Charities Act 2011 defines “sport” as sports or games which promote health by involving physical or mental skill or exertion.
The advancement of human rights?
Charity Commission guidance includes in its examples of the sorts of purposes falling within this head:
· raising awareness of human rights issues, relieving the victims and securing the enforcement of human rights laws; and
· the promotion of restorative justice and other forms of conflict resolution or reconciliation.
Environmental protection?
Section 3(1)(i) provides that this head includes both the protection and improvement of the environment.
Charities may need to produce independent expert evidence to show that the particular species, land or habitat to be conserved is worthy of conservation.
The relief of those in need?
This charitable purpose is for the relief of those in need because of youth, age, ill-health, disability, financial hardship or other disadvantage. Section 3(2) (e) provides that this includes relief given by the provision of accommodation or care.
The relief of those in need is a separate head of charity from the relief of poverty. It is therefore clear that a person does not need to be poor to be in need.
The advancement of animal welfare?
The purpose of the advancement of animal welfare includes providing for the welfare of particular types of animal (e.g. cats and kittens in Re Moss) as well as animals generally. It has also included improving methods for slaughtering animals (Re Wedgewood)
Trusts for the care of particular animals (e.g. the testator’s pet dog) are not included, although such trusts might exceptionally be upheld as non-charitable purpose trusts.
The efficiency of public services?
Section 3(1)(l) provides that this purpose relates to the efficiency of the armed forces, the police, fire and rescue services or ambulance services.
Case law has upheld a fund for the promotion of physical fitness (Re Gray) and for the provision of a library (Re Good) in respect of an army regiment as charitable.
In addition to the existing case law Charity Commission guidance suggests a series of examples of purposes which would be considered charitable under this head including:
· increasing technical knowledge of members of the services through the provision of educational resources, competitions and prizes;
· providing opportunities for services personnel to gain additional experience relevant to their jobs.
Wholly and exclusively charitable?
For a trust to have charitable status, its purposes must be wholly and exclusively charitable. In other words, all its purposes must be charitable.
What happens if a trust has a mix of charitable and non-charitable purposes?
· As a basic rule, the trust will be void unless the non-charitable purpose falls within a recognised category of non-charitable purpose trusts. If the trust fails, the property will return to the settlor on a resulting trust.
· If the non-charitable purpose can be construed as ‘incidental or subsidiary’ to the main, charitable purpose, the trust will remain effective (Latimer v IRC).
· 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 part. This will only be possible if the trust language contemplates severance of the fund (Salusbury v Denton). This requires the amount allocated to each purpose to be quantifiable (Re Coxen).
True or false: A trust will only be charitable if the purpose of the trust falls strictly within a recognised charitable purpose.
False
There is provision for purposes which are analogous to or within the spirit of the statutory purposes to be charitable.
Which of the following would NOT be a charitable purpose?
The care of family pets.
The funding of a mountain rescue service.
The repair and maintenance of a churchyard
The provision of a homework club.
The preservation of an area of outstanding natural beauty.
The care of family pets.
The care of specific animals is not charitable, although the welfare of animals generally is a charitable purpose.
A testator intends to create a charitable trust to promote the work of an amateur artist who specialises in minimalistic modern art. Which of the following statements is correct?
The purpose may be charitable if the artist believes it is of artistic merit.
The purpose is charitable.
The purpose is not charitable.
The purpose may be charitable but expert evidence of artistic merit may be required.
The purpose will only be charitable if it can be shown that the art is of educational value.
The purpose may be charitable but expert evidence of artistic merit may be required.
The purpose may fall under the charitable purpose of the advancement of the arts. Charity Commission guidance provides that to be charitable the art needs to be of merit, and the assessment of this may require expert evidence.
Is there a presumption of public benefit for charitable trusts?
No
What are the requirements for the charitable purpose requirement for charitable trusts?
There are two elements to the public benefit requirement:
* whether there is an identifiable benefit; and
* what constitutes the public, or a section of the public.
How is identifiable benefit found?
Benefit is balanced against any detriment or harm arising from the purpose. The benefit must be capable of being identified and described even if it cannot be quantified or measured. If it is not obvious that the purpose is beneficial, the Charity Commission may require evidence.
How to satisfy the Public or section of the public test?
To satisfy the test:
* the possible beneficiaries must not be negligible in number; and
* the 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 (Oppenheim v Tobacco Securities Trust Co Ltd).
Can charitable trusts focus on certain beneficiaries?
Charity Commission guidance provides that charities can choose to focus on certain beneficiaries provided that:
* they have proper reasons for doing so
* the poor are not excluded from benefit
* the people focused on are a sufficient section of the public for the charity’s purpose. What constitutes a section of the public is therefore related to the purpose of the charity.
What happens if a charitable trust fails?
Charitable trusts are therefore subject to the cy-près doctrine.
This provides that 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.
