Purpose Trusts Flashcards
What is a purpose trust?
A trust that is meant to satisfy a purpose, rather than a beneficiary.
E.g. a trust for the advancement of X cause.
What is the general rule around purpose trusts?
As a general rule - they are void.
They offend the beneficiary principle so cannot subsist, there would be no one to enforce the trust.
What are the perpetuity rules for non-charitable purpose trusts?
They must vest within 21 years. Void, unless:
(a) the trust states it is to last for no more than 21 years; or
(b) the trustees may spend all the trust capital at any one time and thereby end the trust.
What is the exception to a 21 year perpetuity period in non-charitable purpose trusts?
It can be 21-years plus life in being. So, the 21 year period doesn’t start until after an e.g. royal family members life.
Which one of these trusts violates the perpetuity rule?
(1) I give £40,000 for the maintenance of the changing rooms; or
(2) I give £40,000 for changing rooms to be built?
1 - as it can potentially continue on forever. In 2, the trust property can all be spent at one time so it doesn’t violate the perpetuity rules.
When is a charitable purpose trust ‘charitable’?
(a) trust must be for a charitable purpose (poverty, education, religion);
(b) trust must have sufficient public benefit; and
(c) trust must be exclusively charitable.
What is ‘public benefit’ for a purpose trust?
(a) trust purpose must have identifiable benefits (e.g. the purpose of advancing disabled education); and
(b) the benefit must be to the public (so not where the group is so restricted (except for poverty to an extent) - so if there is a personal nexus and some are excluded it is inadequate.
What is ‘exclusively charitable’?
(a) must not have a political purpose; and
(b) if the charitable organisation includes fees, the profits from the fees must be put into the trust
What are the two ways a non-charitable purpose trust can be valid?
(i) Re Denley trust; or
(ii) it is a trust of imperfect obligation
What is a Re Denley trust?
(a) the trust gives rise to a sufficiently tangible benefit (e.g. building a gym);
(b) the persons who stand to benefit must be ascertainable (building a gym for a certain company’s employee’s;
(c) trust must not be for more than 21 years//trust can be spent all in one.
What is a trust of imperfect obligation?
(a) trusts to care for specific animals, e.g. a favourite pet; and
(b) trusts to maintain graves and tombs
