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PURPOSE TRUSTS - Coggle Diagram
PURPOSE TRUSTS
CHARITABLE PURPOSE TRUSTS
Rule against remoteness of vesting
Applies to charitable trusts =
property held on a charitable trust must vest in the charity within 125 years.
Trustees will continue to hold and use capital which vests in charity unless the property runs out. Property may never run out =
charitable purpose trusts can exist indefinitely.
Enforceable by
Attorney General
CY-PRES DOCTRINE
If
charitable purpose trust fails any surplus funds will be applied to another charitable purpose
by the Charity Commission or court.
There are 5 grounds on which the original purpose can be altered:
The original purpose has been
fulfilled or cannot be carried out
The original purpose may still be
workable but does not use all the property available to the trust
The property from
similar trusts is combined so as to be used more effectively
The original purpose
referred to an class of persons which is no longer relevant or suitable
The purpose has: been
adequately provided for by other means
OR
ceased to be charitable in law
OR
ceased to provide a suitable ] method of using the property
Where a private trust fails there is usually a resulting trust to the settlor
HOWEVER - if there is an initial failure > court asks =
Is there a
specific intention to benefit a particular object, or an intention to give effect to a general mode of charity
in document (even if reference to specific object?
Only in the latter case can
property be applied cy-près
2. Satisfy a public benefit test
No presumption of public benefit
1. Is there an identifiable benefit?
Question of fact =
must be identified having regard to all the evidence
> settlor’s belief as to benefit is not relevant.
Benefit is
balanced against any detriment or harm
arising from the purpose.
2. Public or section of the public
The purpose
must be beneficial to the public or section of the public
, not to a private class of individuals. (purpose cannot be political)
Test:
the
possible beneficiaries must not be negligible
in number; and
the quality which distinguishes them from other members of the community
must not depend on their relationship to a particular individual
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
Public benefit requirement is relaxed for prevention or relief of poverty trusts= beneficiaries can be connected to settlor
3. Be wholly and exclusively charitable
All its
purposes must be charitable
If a trust has a
mix of charitable and non-charitable
purposes, the consequences depend on facts:
Basic rule = 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 is incidental or subsidiary’
to the charitable purpose =
trust is effective
If the
charitable and non-charitable purposes can be separated
(quantifiable), 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
1. Be for a charitable purpose
falls
within 1 of 12 heads within s.3(1)
is for the
public benefit
Heads of charity
1. The prevention or relief of poverty (going short)
Judged against a
person's status in life
: purpose must not benefit the rick / poverty can be inferred / temporary
2. The advancement of education
Includes training, research or broader education
Includes: museum / galleries / libraries / pre-schools / PTAs / organisations providing lif**e skills training
3. The advancement of religion
Includes: religions which involve
belief in more than one god / goddess/ supreme beign OR ones which do not
involve a belief in a god AND which
promote their message
Requirements:
a
relationship
between the believer and the supreme being
seriousness
and importance
moral or ethical
framework
4. The advancement of health / saving of lives (holistic view)
Includes: prevention or relief of sickness, disease or human suffering, and the promotion of health
5. Citizenship / Community development
Includes:
rural and urban regeneration
AND promotion of civic responsibility, volunteering or the effectiveness of charities
6. Arts, culture, heritage or science
Must be of
merit / have cultural or historical
importance
7. The advancement of amateur sport
Sports or games which
promote health by involving physical or mental skill or exertion
8. The advancement of human rights / conflict resolution
Purpose must
not stray into political objectives
9. Environmental protection
Preservation of the
natural environment and promotion of sustainable development
10. The relief of those in need
Relief by
accommodation or care
of those in SPECIFIC need because of
youth, age, ill-health, disability, financial hardship or other disadvantage
11. The advancement of animal welfare (cats)
Includes improving methods for slaughtering animals
12. The efficiency of public services
Relates to the
efficiency / technical knowledge / opportunities of the armed forces, the police, fire and rescue services or ambulance services
General purpose
Includes purposes which would have been recognised as charitable under the previous law, but not included in heads
NON-CHARITABLE PURPOSE TRUSTS
Non-charitable purpose trust may be valid if they fall within the exceptions to the beneficiary principle (established in Re Endacott) which apply only when a trust is created in a will:
Trusts for the maintenance of particular animals
Trusts for the erection and maintenance of monuments and graves
Trusts for the saying of private masses
These are not charitable as do not pass pubic benefit test
There is
no recognised method of enforcement for non-charitable purpose trusts
. They are therefore known as ‘trusts of imperfect obligation’.
Rule against inalienability
Applicable to non-charitable purpose trusts =
trust cannot last longer than the common law period of 21 years
(can be extended by reference to a human (not animal) life i.e. the 21 year period does not start to run until the person dies).
It must be
clear from the outset that the trust must end within the prescribed perpetuity period
> no wait and see rule
The perpetuity period
starts to run when the trust comes into effect
i.e. on the date of the testator's death.
Exceptions to the beneficiary principle
Charitable purpose trusts
Non-charitable purpose trusts