Charities

Charitable Trusts

How is a charitable trust different from other types of trust?

A charitable trust is different from a private purpose trust as it does not benefit an individual, but the public, or some part of it.

This is significant for two reasons. Firstly, because it means that there are no named beneficiaries that can enforce the terms of the trust. However, in the case of charitable trusts, this role is carried out by the Attorney-General. Secondly, because it means that charitable trusts cannot satisfy the three certainties. Thus, charitable trusts are exempt from the requirement of certainty of objects (Morice v Bishop of Durham).

The advantages of charitable status

1.       Tax advantages. Charitable trusts are not subject to a number of taxes, such as income tax, corporation tax and capital gains tax.

2.       The rule against perpetuities does not apply to charitable trusts. This means that property can be dedicated indefinitely to charitable purposes.

Charitable trusts are regulated by the Charity Commission.

Reforms to Charities Act 2006 have been consolidated in Charities Act 2011.

What are the legal requirements of a valid charitable trust?

1.       Recognised charitable purpose
The first statement of charitable purposes was set out in Pemsel. Four heads of charity were identified. The relief of poverty, the advancement of education, the advancement of religion, other purposes beneficial to the community.
However, section 3 of the Charities Act 2011 now provides the heads of charity.

a. Section 3(1)(a): charities for the relief or prevention of poverty. The meaning of poverty is wide, and can be said to include those that merely ‘go short’ (Re Coulthurst). In Re Sanders, a gift to provide housing for working classes was not held to be a trust for the charitable purpose of relieving poverty. On the other hand, Re Niyazi’s Trusts was a trust for the relief of poverty because it involved building a hostel, in which people would live that could not afford housing. The public benefit for charities for the relief of poverty requirement is laxer than for other heads. Attorney General v Charity Commission for England and Wales – as relieving poverty is beneficial to the entire community, the public benefit requirement will be satisfied even if the purpose might otherwise fail to satisfy public benefit. Dingle v Turner – if the gift aims to relieve poverty among a particular poor people, it will be charitable. Re Segelman – a trust for – ‘poor and needy’ people was upheld even though the class to benefit only consisted of 26 people (a very narrow class). Charities that relieve poverty must still have exclusively charitable purposes (Re Gwyon).

b. Section 3(1)(b): charities for the advancement of education. Education is defined in IRC v McMullen as ‘…instruction, training and practice.’ Education can therefore encompass a wide variety of purposes. Such as, promoting the study of Egyptology (Re British School of Egyptology), London Zoo (Re Lopes), a chess tournament for young people (Re Dupree). Research can be a…