Trusts - Purpose Trusts

Question 1

Purpose Trusts

Answer 1

A form of express trust

Two types:

• Public or charitable purposes
• Private purposes (non-charitable purpose trusts)

Question 2

Charitable Trusts

Answer 2

Three ways in which they differ from private express trusts:

1. No requirement for certainty of objects or the beneficiary principle
2. Cy-pres doctrine applies
3. Rule against perpetuities do not apply

Question 3

Requirement for Charitable Trusts

Answer 3

1. Must fall within one of the defined charitable purposes
2. Must meet public benefit requirement
3. Must be exclusively charitable

Question 4

Defined Charitable Purposes (Charities Act 2011)

Answer 4

E.g. prevention or relief of poverty, advancement of education, religion, heath, citizenship, culture, amateur sports, human rights, animal welfare

Should be familiar enough with the list to know if a purpose falls within it

Question 5

Public Benefit

Answer 5

• Trust must give an identifiable benefit to the public generally or a sufficient section of the public
• Trusts for the relief of poverty where a trust links to a particular person / business may be valid so long as the individuals are not named (e.g. ‘poor relations’ was deemed to meet public benefit test)
• However, if a trust references a group related to an individual or business that will stand to benefit the public benefit test will not be satisfied
• Public benefit test will not be met if a fee must be paid to benefit from the trust
• Incidental benefit to some private individuals does not prevent it from meeting the public benefit requirement
• Political purposes are not considered charitable (although if an ancillary / secondary purpose is political this will meet the requirement)

Question 6

Wholly and Exclusively Charitable

Answer 6

• Non-charitable purposes are only admissible if they are ancillary
• If a trust has several purposes each one must be charitable to be valid
• If a trust directs trustees to divide gifts between some charitable and some non-charitable objects the court can sever the charitable part from the non-charitable part

Question 7

Enforcement

Answer 7

• No-one to see that the trust is managed properly by trustees as no named beneficiaries: overcome by fact Attorney General enforces charitable trusts

Question 8

Rule against Perpetuities

Answer 8

• Inalienability rule does not apply: this prevents the capital of a trust being held indefinitely while the income is applied for some private purpose
• Charitable trust may continue indefinitely
• Remoteness of vesting rule: initial gift to charity must vest within the perpetuity period but a gift from one charity to another does not

Question 9

Cy-Pres Doctrine

Answer 9

• If a trust’s charitable purposes are impossible / impractical to carry out the court can apply the trust property to a different but similar charitable purpose and the trust will not fail
• Applies differently to initial and subsequent failures of gifts
• Will need to look at date of charity closure to determine whether initial or subsequent failure

Question 10

Initial Failure of Gift

Answer 10

• Gift to charity fails at outset (e.g. because charity which was intended to benefit no longer exists)
• Cy-pres doctrine will only apply where general charitable intention can be shown
• Case law shows that a court will be unlikely to find general charitable intent where gift only to a specific named charity (however if named charity never existed it will be easier for the court to find general charitable intent)
• Court will look at the will as a whole and if there is more than one gift to charity it will be easier to establish a general charitable intent
• Detailed plans for a particular charity will make it difficult for general charitable intent to be shown

Question 11

Subsequent Failure of Gift

Answer 11

• When charitable trust has already come into existence but fails subsequently
• No general charitable intention needs to be established to apply cy-pres doctrine

Question 12

Non-charitable purpose trusts

Answer 12

• Not generally valid under beneficiary principle (the idea that the trust must have identifiable human beneficiaries who can enforce it)

Question 13

Denley Trusts

Answer 13

• A type of non-charitable purpose trust
• Have an underlying human beneficiary who can enforce trust
• Do not confer a beneficial interest
• Have power to enforce the trust by injunction

Question 14

Honorary Trusts

Answer 14

A type of non-charitable purpose trust

• Maintenance of animals
• Saying of private masses
• Maintenance of graves

Valid but unenforceable as no beneficiary

Trust relies on honour of trustee to carry out the trust - if they fail / refuse to they will hold property on resulting trust

Perpetuity period applies:

• 21 years
• Human life in being plus 21 years

Court will not take judicial notice of the likely lifespan of a living animal - therefore, trusts for the maintenance of an animal will fail unless they specify the duration (i.e. cannot be for an animal’s “lifetime”)

If whole gift is likely to be spent within the perpetuity period the gift may be valid