Purpose trusts: Introduction to the requirements

Question 1

What is a purpose trust?

Answer 1

A purpose trust is a type of trust which has no beneficiaries

2 kinds:
- Charitable purpose trust
- Non charitable purpose trusts

Question 2

What is a charitable trust?

Answer 2

Trusts that are recognized despite the absence of ascertainable
beneficiaries because they are for the public benefit.

Question 3

Who can enforce a charitable trust?

Answer 3

They are enforceable by the Attorney-General, with practical responsibility for enforcement lying with the Charity Commission.

Question 4

Benefits of charitable trusts?

Answer 4

a) No requirement to comply with the beneficiary principle

b) More flexible rules on certainty of objects (i.e. certainty of purpose)

c) No limit on their duration (i.e. they can exist in perpetuity)

d) A rule known as the cy-près doctrine which allows the trust property to be applied for other charitable purposes even if the specific trust fails.

e) Tax benefits

Question 5

What is a non-charitable purpose trust?

Answer 5

Trusts that s have been recognised as valid in specific, exceptional cases. These are known as the ‘Endacott’ exceptions.

The trusts recognised in Re Endacott are anomalous exceptions to the beneficiary
principle.

Unlike charitable trusts, there is no recognised method of enforcement.

Question 6

What are the key differences between these two types of trusts?

Answer 6

1. Enforceability; charitable purpose trusts are legally enforceable while non-charitable purpose trusts are ‘trusts of imperfect obligation’.
2. Certainty of objects – Charitable purpose trusts benefit from relaxed rules of certainty of purpose.
3. Perpetuity – Charitable purpose trusts can last indefinitely while non-charitable
   purpose trusts are restricted in duration by the common law perpetuity rules.

Question 7

What do we mean by perpetuity?

Answer 7

The law prevents people from tying up their assets on trust in perpetuity (indefinitely). This is for policy reasons

Question 8

What do we mean by flexible certainty of purpose rules for charitable trusts?
(Re Astor’s settlement trust)

Answer 8

It is sufficient that there is an intention to apply property for a charitable purpose.

• The court will strive to resolve any uncertainty and hold the trust valid once it has established charitable intent.
• The Charity Commission or the court can provide a “scheme” to specify the charitable purposes the property should be applied to.