Beneficiary Principle and the Rule against Perpetuity Flashcards Preview

Equity & Trusts > Beneficiary Principle and the Rule against Perpetuity > Flashcards

Flashcards in Beneficiary Principle and the Rule against Perpetuity Deck (13):

Steps required

1. State whether it is an outright gift or a trust
2. Explain that the issue concerns the beneficiary principle
(deal with any exceptions that may apply)
3. Consider the rules against perpetuity


Definition of 'beneficiary principle'

Need identifiable human beneficiaries who can enforce the trust
Morice v Bishop of Durham


Exceptions to the beneficiary principle

1. Unusual exceptions
2. Purpose trusts
3. Charitable exception
4. Non-charitable unincorporated exception


Unusual Exceptions
(Beneficiary Principle)

- Care/maintenance of animals (Re Dean)
- Care/maintenance of graves/monuments (Re Hooper)


Purpose trusts exception
(Beneficiary Principle)

Purpose trusts normally violate the principle due to lack of ascertainable beneficiaries BUT exceptions will be made where purpose trusts have ascertainable beneficiaries and are directly for the tangible benefit of individuals.


Charitable Exception (Beneficiary Principle)

Charitable Trusts will not violate the beneficiary principle because they are enforced by the Attorney General.


Criteria for a valid charitable trust

a. Charitable purpose (s.2(1) Charities Act 2011). Purposes are listed in s.3(1) of CA2011.
b. Sufficient Public benefit
c. Exclusively charitable (no political purpose - McGovern); will be permitted if non-charitable purpose is merely incidental)


Notes for meeting criteria of sufficient public benefit for charitable trust

'public benefit' defined in s.4(3) Charities Act 2011

Numbers can't be negligible; can't be a class within a class (IRC v Baddeley)
Trusts for relief of poverty are charitable even if benefit is limited to small class of objects (Re Scarisbrick)

See YourGDL p. 86 for more


Non-charitable unincorporated association - definition

A group bound together for a common purpose;
not being a business purpose (Burrell)


Non-charitable unincorporated association exception
(Beneficiary Principle)

General principle - 'unincorporated associations have no legal personality and so cannot hold property in the name of the association'
(Morice v Bishop of Durham)
- No identifiable human beneficiaries to enforce trust


Giving effect to a trust for a non-charitable unincorporated association

a. Trust as outright gift to members, as an accretion to the association's funds - Re Recher's Will Trusts

b. Trust for purpose, if a purpose is specified that benefits the members.
Need to consider whether it can be effected un Re Lipinksi's Will Trusts, Re Recher or Re Denley


The rule against inalienability
(Rules against perpetuity)

Non-charitable purpose trusts must either:
a. allow the trustees to spend all the trust capital on the given purpose, hence ending the trust at any time; or
b. be limited in duration to 21 years
(Re Hooper)


The rule against remoteness of vesting
(Rules against perpetuity)

A contingent interest may become a vested interest within 125 years for all trusts made after 6 April 2006
(Perpetuities Act 2009)