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Charitable trusts (In the UK, the Charities Act 2006 defines a charitable…
Charitable trusts
In the UK, the Charities Act 2006 defines a charitable trust is one that is created for the
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Advancement of the arts, culture, heritage or science
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Advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity
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Relief of those in need by recon of youth, age, ill health, disability, financial hardship or other disadvantages
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Promotion of the efficiency of the armed forces of the Crown or the efficiency of the police, fire and rescue services or ambulance services
A first requirement for a charitable trust is that there must be a charitable purpose. The best summary of those purposes accepted as charitable was made by Lord Macnaghten in Commissioners of Income Tax v Pemsel (1891). He divided charities into four main headings, trusts for
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In general, charitable trusts are subject to the same rules as private trusts, but because of their public nature they enjoy a number of advantages, which are not always shared by private trusts.
Charitable trusts are not usually subject to the perpetuity rule – they can be more than the limit set down within the local trust law.
Charitable trusts are an exception to the rule that a trust must have identifiable beneficiaries in order to be valid. By its nature, the trust will be for the benefit of a charitable purpose and not for the benefit of individuals.
If it becomes the case that the charitable purpose cannot be carried out within the spirit of the settlor’s wishes either initially or during the life of the trust, the Cy-pres (as near as) doctrine may apply and the court will choose the charity purpose and the gift may thus be applied to a charitable purpose similar to the one specified in the trust deed.
This trust must be for the benefit of an acceptable charitable purpose and not specific individual persons, although the performance of the trust may result in individuals taking a direct benefit of the trust assets.
In order for the trust to be considered charitable, the purpose of the trust must be wholly charitable
Charitable trusts are one exception to the rule that a trust must have identifiable beneficiaries in order to be valid. If it becomes the case that the charitable purpose cannot be carried out within the spirit of the settlor’s wishes, the laws provide that the court can order that the property can be applied to another charitable purpose that is similar to that originally intended.
The second requirement is that the assets must be for the public benefit, i.e. that it confers some tangible benefit on the public at large or a sufficiently wide section of the community.