Charitable trusts

A Charitable Purpose

Charitable trusts can be made for a charitable purpose. The meaning includes those which are considered to be of value and importance to the community.

Charitable purposes

For the purposes of the law of England and Wales, ‘charitable purposes’ means purposes which are for the public benefit, and fall within any of the following descriptions of purposes:

  1. the prevention or relief of poverty;
  2. the advancement of religion;
  3. the advancement of education;
  4. the advancement of health or the saving of lives;
  5. the advancement of citizenship or community development;
  6. the advancement of the arts, culture, heritage or science;
  7. the advancement of amateur sport;
  8. the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;
  9. the advancement of environmental protection or improvement;
  10. the relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;
  11. the advancement of animal welfare;
  12. the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services;
  13. any other purposes recognised as charitable under existing charity law, including facilities for recreation or other leisure-time occupation, if the facilities are provided in the interests of social welfare;
  14. any purposes that may reasonably be regarded as analogous to, or within the spirit of, a purpose falling within heads1-13 above; and
  15. any purposes that may reasonably be regarded as analogous to, or within the spirit of, a purpose which has been recognised under head 14 above

In order for a gift to be charitable it must fall within one or more of the headings above and have a necessary element of public benefit. There are two elements relating to the second condition, mainly that the purpose must have an identifiable benefit and secondly that benefit must be available to a sufficient section of the public.

It is a duty of the court to determine whether particular purpose is charitable.

Formation

In the stipulation of a charitable trust exact words to the effect of the creation of a trust need be used. However, there is no necessity in the word “trust” to be used.

Charitable purpose rules govern that there is no need for a human beneficiary to be able to enforce such a trust. This is a departure from the original principal need for a certainty of a beneficiary. In that respect individuals who may benefit under such trusts have no standing in enforcing them. In practice, therefore, charitable trusts are enforced by the Attorney-General in the name of the Crown.

Further, the amount of the gift needs to be able to be ascertained with sufficient certainty for the gift to be valid, otherwise the gift fails.

Benefits of a charitable trust

The rules relating to creation of charitable trusts are much more relaxed in comparison with the rules for creating other non-charitable purpose trusts.

One of the benefits is that there is no requirement for the objects of the trust to be certain. Therefore, a trust for “charitable purposes” will be valid. There is a need for the objects of the trust to be exclusively charitable. Further, the purpose provided must have sufficient certainty so that the court could control the application of the assets. Therefore, the relaxation of the rule in practice relates only to the particular form of charitable purpose intended.

Charitable trusts may also be perpetual. This is in light of the proposition that the purpose of many charitable trusts could be seen as almost impossible to accomplish. Therefore, contrasting to other trusts charitable gifts will not be void if the specified period is longer than the perpetuity period. As a result charitable trusts can be valid made for whatever period even if perpetual, indefinite or limited.

The benefit considered most important with regards to charitable trusts is the fact that charities are exempt from income tax, provided that the income is applied for charitable purposes only. Therefore, tax paid or credited prior to the payment of interest may be recovered from the Inland Revenue. Provisions also apply with regards to “Gift Aid” donations allowing for tax relief if the donation is a qualifying one under the Income Tax Act 2007. In respect of such gifts the donor must give an appropriate declaration.

Duties of charitable trustees

After a charitable trust has been upheld as valid, the duties of the trustees become relevant. In practice those do not differ from the duties of trustees of non-charitable purpose trusts. The primary duty is to execute the trust in accordance with its terms in the interest of the beneficiaries prescribed.