Trusts Unit 2

Question 1

Inalienability of capital

Answer 1

Trusts for individuals can lock property away for up to 125 years.

Non-charitable purpose trusts however can only be for a maximum of 21 years. These trusts will offend this rule unless they are stated to last less than 21 years or the trustee may spend all of the trust property on the purpose and end the trust at any time.

Question 2

Conditions for charitable trusts (Charities Act 2011)

Answer 2

1. The trust must be for a charitable purpose.
2. The trust must have sufficient public benefit.
3. And the trust must be exclusively charitable.

Most charitable trusts are enforced by the Attorney General and regulated by the Charity Commission.

Question 3

The first three charitable purposes under s3(1) Charities Act 2011

Answer 3

1. Prevention or relief from poverty - poverty does not mean destitute, but rather going short.
2. Advancement of education - includes research when that research is useful and the results are published.
3. Advancement of religion - taking positive steps to sustain and increase religious belief.

Question 4

Two conditions of sufficient public benefit

Answer 4

1. The trust property must have an identifiable benefit, and
2. The benefit must accrue to the public or a sufficiently large section of the public.

Question 5

Public benefit in relation to the main three charitable purposes

Answer 5

To relieve poverty amongst named individuals is not charitable however to do so amongst ‘my family’ or ‘my relatives’ is charitable. Allowed due to how important the objective is.

There is a public benefit in the advancement of religion if either 1. the place of worship is open to all, even if only a small number attend, or 2. whilst the place of worship is not open to all, members live in this world and mix with their fellow citizens.
Religious orders that isolate themselves are not charitable.

For the advancement of education and other purposes, the people that benefit must not be numerically negligible but must still meet certain tests:
i. the personal nexus test - people linked by relationship to individual/company are not a sufficient section of the public.
ii. the class within a class test - class of people that benefit can be limited as long as the limits are legitimate, proportionate, rational or justified given the nature of the trust.
iii. charitable trusts must not exclude the poor - fees can be charged as long as profits go back into the charitable purpose. Fees cannot be too expensive.

Question 6

Exclusively charitable

Answer 6

To be charitable, a trust must not have political purposes.
If it charges fees, the profits must go back into the trust rather than be paid over to private individuals.

Charities can engage in political activities that are ancillary or incidental to their main charitable purpose as long as they do not become the dominant means by which the charity carries out its purpose.

Question 7

Re Denley trusts conditions

Answer 7

a. the purpose of the trust must be sufficiently clear and give rise to a sufficiently tangible benefit;
b. the persons who stand to benefit must be ascertainable. Must satisfy the given postulant test (either is or is not) and therefore must be conceptually certain; and
c. the trust must not offend the rule against inalienability of capital ie not go over 21 years.

Question 8

Trusts of imperfect obligation

Answer 8

These trusts include trusts to care for specific animals such as a favourite pet, and trusts to maintain graves and tombs.
Must comply with the rule against inalienability of capital.

These trusts are valid but not enforceable due to offending the rule against beneficiaries.

The beneficiary of the residuary estate can go to court to claim the trust property for themselves.