Charitable purpose trusts (The distinction between charitable trusts and non-charitable purpose trusts) Flashcards
(24 cards)
What distinguishes charitable trusts from most express trusts in terms of enforcement and beneficiaries?
Charitable trusts do not have identifiable individual beneficiaries and instead exist to fulfill a charitable purpose. This exempts them from the beneficiary principle and certainty of objects, provided they meet statutory conditions.
What are the key statutory requirements for a valid charitable trust under the Charities Act 2011?
The trust must have a charitable purpose under Section 3(1) (such as poverty relief, health, or religion), and it must provide a public benefit under Section 4.
What are the two aspects of the public benefit requirement for charitable trusts?
There must be a tangible benefit to the community (benefit aspect), and the benefit must be available to a sufficiently large or open section of the public (public aspect).
When can geographical or group-based restrictions in a charitable trust be acceptable?
Such restrictions are acceptable if they are justifiable, proportionate, and align with a charitable objective, like promoting a specific religion with public outreach.
What is the significance of the ‘personal nexus’ rule in charitable trusts?
A charitable trust must not primarily benefit a group connected by familial or employment ties, as this fails the public benefit test (e.g., a trust for employees of a specific company).
Can a charity charge fees for its services and still be valid under charity law?
Yes, but they must not exclude the poor. To qualify as charitable, fee-charging entities must make meaningful provisions for those unable to pay.
Why are political purposes prohibited as the main aim of a charitable trust?
A trust with the primary purpose of changing the law or influencing public policy is deemed political and void. Political activity is only permitted as a secondary aim supporting the main charitable purpose.
Under Section 3(1) of the Charities Act 2011, what are some examples of purposes considered charitable?
Relief of poverty, advancement of education, advancement of religion, and advancement of health or the saving of lives.
How does the law determine whether a trust for poverty relief qualifies as charitable?
The trust must target a group who cannot afford basic necessities; broad or vague classifications (e.g. “working class”) may not suffice.
What makes a group-based limitation acceptable under the public benefit test?
If the group restriction is proportionate and based on legitimate charitable needs, such as religious advancement or geographical focus, it may still be acceptable.
Why might a religious trust not qualify as charitable even if its aim is religious advancement?
If the religious group is isolated from society with no interaction with the broader public, it fails the public benefit requirement.
Can a charitable trust engage in political activities and still remain valid?
Yes, but only if the political activity is secondary and supports a main charitable objective — not if the political aim is the central purpose of the trust
What is the maximum duration of a non-charitable purpose trust under the rule against inalienability?
A non-charitable purpose trust must either last no more than 21 years or give trustees the power to spend all the trust capital within that time to avoid violating the rule against inalienability.
How does the perpetuity rule differ for express trusts compared to non-charitable purpose trusts?
Express trusts can last up to 125 years under the perpetuity rule, while non-charitable purpose trusts are restricted to 21 years unless otherwise terminated by trustee powers.
What is the rule against inalienability of capital?
It prohibits non-charitable purpose trusts from tying up capital indefinitely, requiring them to have a maximum lifespan of 21 years or to allow for full capital expenditure within that time.
What are the two types of non-charitable purpose trusts that may still be valid despite lacking direct human beneficiaries?
(1) Trusts of imperfect obligation (e.g., for monuments or animals),
(2) Denley trusts, which serve a purpose that indirectly benefits a defined group of people.
What is a trust of imperfect obligation, and why is it an exception to the usual enforceability rules?
It’s a trust without direct human beneficiaries (e.g., for maintaining a pet’s grave), but may be enforced by interested parties like the settlor’s estate or a residual beneficiary.
What is the key principle established in the Denley case regarding non-charitable purpose trusts?
A trust may be valid if it serves a non-charitable purpose that benefits a specific group of individuals who are identifiable and can enforce the trust.
When is a Denley-type trust likely to be upheld as valid?
When it specifies a purpose that benefits an ascertainable group and is limited in duration (e.g., 21 years), enabling enforcement by those indirectly benefited.
Why are Denley trusts considered enforceable even though they don’t meet the traditional beneficiary principle?
Because they provide a practical benefit to identifiable individuals who can enforce the trust, thus avoiding the need for direct named beneficiaries.
Why would a purpose trust created for the long-term benefit of a private group fail under the inalienability rule?
If the trust does not allow trustees to spend all the capital or lacks a 21-year limit, it breaches the rule against inalienability and is invalid.
Why is a purpose trust not automatically valid just because it benefits a class of people like employees or staff?
Although the class may be enforceable, the trust must still comply with duration limits; otherwise, it fails the rule against inalienability, even if the class is valid.
What distinguishes a Denley trust from a charitable trust in terms of public benefit?
A Denley trust may benefit a private group (like employees), while a charitable trust must serve a sufficiently large section of the public and provide tangible community benefit.
In assessing the validity of a non-charitable purpose trust for the SQE exam, what two key criteria should you check first?
(1) Whether the purpose benefits identifiable individuals who can enforce it, and (2) whether the trust complies with the 21-year rule or allows capital to be fully expended.
