Purpose trust

Question 1

What are the key exception to the beneficiary principle?

Answer 1

• Charitable purpose trust: recognised despite abscene of ascertainable beneficiaries because they are for public benefit
• Non-charitable purpose trust: recognised as valid in specific, exceptional cases (endacott exceptions)

Question 2

What are the benefits of trusts having a charitable status?

Answer 2

• no requirement to comply with beneficiary principle
• flexible rules on certainity of objects
• no limit on their duration (can exist in perpetuity)
• rule allowing trust property to be applied for other charitable purposes even if specific trust fails
• tax benefits

Question 3

What are the key differences between charitable and non-charitable purpose trusts?

Answer 3

• Enforceability: charitable purpose trust are legally enforceable while non-charitable purpose trusts are trusts of imperfect obligation (no recognised method of enforcement)
• Certainity of objects: charitable purpose trusts benefits from relaxed rules of certainity of purpose
• Perpetuity: charitable purpose trust can lasts indefinietly while non-charitable purpose trusts are restricted in duration by common law perpetuity rules.

Question 4

What is the rule on perpetuity?

Answer 4

Law prevents people from putting assets on trust in perpetuity (indefinitely) - for policy reasons (e.g., locking assets away without circulating to economy).
* rule against remoteness of vesting: applies to trusts with beneficiaries or charitable purposes as their objects
* rule against inalienability: applies to non-charitable purpose trusts

common law perpetuity rules is 21 years after the death of the last of the “lives in being” while statutory perpetuity rules has replaced common law (125 years)

Question 5

What is the idea of certainty of purpose?

Answer 5

Certainty are much relaxed in charitable purpose trust than private trusts.
* if there is uncertainty as to how intention is to be carried out, trustees can direct property be applied for such charitable purposes as they select
* court will strive to resolves any uncertainty and hold trust valid onces established trust has charitable intent
* Charity Commission or court can provide a scheme to specify charitable purposes the property should be applied to

= not applicable for non-charitable purpose trusts and normal rules on certainity of objects apply so trusts will be void for uncertainity of objects if purpose is unclear