Non-Charitable Purpose Trusts

Non-Charitable Purpose Trust

Introduction

-          Trusts that do not have a human beneficiary are normally void (Re Astors ST).

-          The beneficiary principle requires that a valid trust must have a beneficiary (Morice v Bishop of Durham).

-          However, there are exceptions to this:

o   Monuments: the erection and upkeep of monuments and graves.

o   Animals: the upkeep of individual animals.

o   Masses: the saying of private masses (religious services in church).

-          They are trusts of imperfect obligation because the trustee does not have to carry out the obligations and there are no human beneficiaries to enforce it. The courts have taken a strict approach to this type of purpose trusts because there is no human beneficiary.

Requirements of a non-charitable purpose trust

-          There are general barriers to the enforcement of purpose trusts which will limit their application.

Perpetuity rules

-          Any purpose trust which is held to be valid must comply with the rules of perpetuity.

-          The two rules relevant to purpose trusts are:

o   Remoteness of vesting:

§  Old rules. Apply to wills made and instruments of trust established before the commencement date of April 2010.

·         The property must not vest in the beneficiary outside of the perpetuity period, which is a life in being plus 21 years. The old common law rule was that if this could fail then the trust was void from the start.

·         Section 15 Perpetuities and Accumulations Act 1964 – which provides that the trustee can ‘wait and see’ if the property will vest within 80 years.

§  New rules. The Perpetuities and Accumulations Acts of 1964 applies as of 2010 and extends the period to 125 years, to trusts made after 6 April 2010.

o   Inalienability: a settlor cannot rule from the grave. To prevent this, a private purpose trust cannot continue forever, unlike a charitable trust. So a trust for purpose must not last longer than a human life in being plus 21 years.

-          The perpetuity period does not have to be legally defined. However, it must be clear that it is within that period. In Re Hooper, the period was limited by the words, ‘so long as the trustees can legally do so.’ This was held to be a valid declaration of the perpetuity period.

Capriciousness

-          A purpose trust can be set aside by the courts if the purpose is capricious.

-          In Re Shaw’s WT, the money left for the development of a new 40 letter alphabet served no valid purpose, and thus the trust was set aside. This principle would apply to all trusts, but is particularly relevant to a pure purpose trust.

The anomalous exceptions

Monuments

A trust for the upkeep will be charitable. However, a trust for the upkeep of an individual monument or grave which is not part of the fabric of a church is not charitable. This is…