Purpose Trusts

Question 1

What is purpose trust?

Answer 1

A trust to carry out a purpose or advance a cause

Question 2

Rules that can make non-charitable purpose trusts void?

Answer 2

1. Beneficiary principle: trust can only valid if they have beneficiaries who can go to court to enforce them
2. Rules against perpetuity (rule against inalienability of capital) : should be no more than 21 years for non-charitable purpose trust

Question 3

What is charitable trust?

Answer 3

1. Charitable purpose
2. Sufficient public benefit
3. Exclusively charitable
   (Charities Act (CA) 2011)

Question 4

What are key charitable purposes?

Answer 4

13 purposes listed in s 3(1) of the CA2011:
1. prevention or relief from poverty
2. advance of education
3. advancement of religion
4. advancement of health or the saving of lives
5. advancement of citizenship or community development
6. advancement of the arts, culture, heritage or science
7. advancement of amateur sport
8. advance of human rights, conflict resolution or promotion of religious or racial harmony.
9. advance of environment protection
10. relief of those in need because of youth, age, ill health, financial hardship
11. advance of animal welfare
12. promotion of efficiency of armed force, police, fire and rescue services and ambulance services
13. analogous charitable purposes.

Question 5

What is key issues with trust for prevention or relief from poverty?

Answer 5

1. named individual - void class of individuals- “my family” or “my relatives” are poverty trusts
2. any political purpose (campaigning to change law or gov. policy) must be ancillary.

Question 6

Religion trust

Answer 6

1. For advancement of religion
2. Worship is open to the public or members of religion mix with the public
3. No political purpose

Question 7

Education trust

Answer 7

1.Advancement of education
2. Must be more than numerically negligible + overcome the following test:
- personal nexus test: people linked by relationship
- class within class: arbitrary restriction not allowed : e.g promotion of sports for benefit of Methodists.
- charitable must not exclude the poor (may charge fee but not too high)
3. No political purpose + profit go back to charitable purpose

Question 8

Valid non-charitable purpose trusts

Answer 8

1. Re Denley trust; or
2. A trust of imperfect obligation

Question 9

Re Denley trust:
A plot of land transferred to trustee to be maintained and used for a sport and recreational ground for 21 years for the benefit of employees of a named company

Answer 9

1. purpose must be clear, benefit must be sufficiently tangible
2. person to benefit from purpose must be ascertainable
3. must be limited in 21 years or trustee must be able to spend all money to the purpose

Question 10

Trust of imperfect obligation

Answer 10

1. trust to care for specific animals
2. trust to maintain grave or tombs

must be limited in 21 years or trustee must be able to spend all money to the purpose.
These trusts are valid but unenforceable (no one can go to court to enforce, but accepted that the settlor/residuary beneficiary of deceased settlor) can go to court to claim trust property for themselves.

Question 11

Do private school count as charitable purpose?

Answer 11

Yes, private schools have charitable status but they must prove that they are providing a public good, must provide facilities for the public, take on scholarship. If not it is not exclusively charitable.