Creation and requirements of express trusts - The beneficiar...

Learning Outcomes

This article explores two essential rules affecting the validity of express trusts: the beneficiary principle and the rule against perpetuities. It explains why most private trusts must have beneficiaries with locus standi to enforce trustee duties, and why trusts cannot tie up property indefinitely. It sets out the narrow exceptions permitting certain non-charitable purpose trusts (trusts of imperfect obligation), clarifies how the Re Denley approach works where a purpose confers direct or indirect benefits on identifiable persons, and distinguishes gifts to unincorporated associations that are valid on a contract-holding basis. It also details the modern statutory perpetuity regime for remoteness of vesting (including the 125-year period and ‘wait and see’) and the common law rule against inalienability affecting non-charitable purpose trusts.

By the end, you can recognise when a trust offends the beneficiary principle, correctly classify borderline purpose arrangements, and apply the applicable perpetuity rule and period to contingent and successive interests, including the charity-to-charity exception.

SQE1 Syllabus

For SQE1, you are required to understand the essential requirements for creating a valid express trust, including the three certainties and the rules discussed in this article, and to identify whether a purported trust fails due to offending the beneficiary principle or the rule against perpetuities, with a focus on the following syllabus points:

• The beneficiary principle and the rationale behind it.
• The recognised exceptions to the beneficiary principle, including charitable trusts and specific non-charitable purpose trusts.
• The rule against perpetuities, including the rule against remoteness of vesting and the rule against inalienability.
• The statutory perpetuity periods and how they apply.
• The consequences of breaching either the beneficiary principle or the rule against perpetuities.
• How to classify gifts to unincorporated associations (e.g., as contract-holding gifts) and the relevance of members’ control.
• The Re Denley approach to purpose trusts that benefit ascertainable individuals.
• Administrative unworkability and capriciousness in discretionary arrangements.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Why must a private trust generally have ascertainable human beneficiaries?
   1. To ensure the trust property is certain.
   2. To satisfy the requirement of certainty of intention.
   3. So there is someone who can enforce the trust against the trustees.
   4. To comply with the rule against perpetuities.
2. Which of the following is a recognised exception to the beneficiary principle?
   1. A trust for the maintenance of the settlor’s car.
   2. A trust for the promotion of a political party.
   3. A trust for the care of the testator's specific pet dog for 21 years.
   4. A trust for 'my best friends'.
3. What is the primary purpose of the rule against perpetuities?
   1. To ensure beneficiaries are treated fairly.
   2. To prevent property being tied up indefinitely within a trust.
   3. To ensure trustees invest trust property wisely.
   4. To define the duties of a trustee.
4. Under the Perpetuities and Accumulations Act 2009, what is the standard perpetuity period for trusts created on or after 6 April 2010?
   1. 21 years
   2. 80 years
   3. 125 years
   4. Lives in being plus 21 years

Introduction

For an express trust to be valid, beyond satisfying the three certainties (intention, subject matter, and objects), it must also comply with two fundamental principles: the beneficiary principle and the rule against perpetuities. These principles address core requirements of enforceability and the duration for which property can be controlled by the terms of a trust. The beneficiary principle ensures there are human beneficiaries able to enforce equitable duties. The perpetuity rules limit how long property can be kept out of free commerce. Together, they police the boundary between trusts that benefit people and arrangements that attempt to control capital for purposes, and ensure those arrangements do not endure for excessive periods.

The Beneficiary Principle

The general rule is that a trust must be for the benefit of ascertainable persons (beneficiaries), not for abstract purposes. This is known as the beneficiary principle, famously stated in Morice v Bishop of Durham (1804). The courts reiterate that, absent charity, a trust “must be for persons” so the court can supervise performance through a beneficiary’s right to enforce.

Key Term: Beneficiary Principle
The principle that a private, non-charitable trust must have ascertainable human beneficiaries who are capable of enforcing the trust.

The rationale behind this principle is enforceability. If there are no beneficiaries, there is no one who can apply to the court to compel the trustees to perform their duties or to remedy a breach of trust. The court itself cannot supervise the trust’s administration effectively without someone having the right to bring matters before it. Cases like Re Astor’s Settlement Trusts (1949) demonstrate the rule: a trust for maintaining “good understanding between nations” and for “the preservation of the independence of newspapers” was void for lacking beneficiaries and for vagueness of purpose. Similarly, Gilmour v Coats (1949) held that a gift to a cloistered religious order wasn’t charitable because it lacked public benefit and, as a private purpose, it had no human beneficiaries to enforce it.

Key Term: Trusts of Imperfect Obligation
A narrow group of non-charitable purpose trusts (e.g., tombs, specific animals, private masses) that are historically recognised as valid despite lacking human beneficiaries with enforceable rights. They are valid but not enforceable in the ordinary way, and are strictly confined by the courts.

Consequences of Breaching the Beneficiary Principle

If a trust attempts to benefit a purpose rather than ascertainable individuals and does not fall within the recognised exceptions, it will generally be void. The property will be held on a resulting trust for the settlor (or their estate if the trust was created by will). Where a disposition mixes charitable and non-charitable objects, the court may sever the charitable portion (if possible) and allow that part to stand, with the non-charitable portion failing for want of beneficiaries.

Exceptions to the Beneficiary Principle

There are important exceptions where trusts for purposes are permitted:

1. Charitable Trusts: These trusts are for purposes beneficial to the public (e.g., relief of poverty, advancement of education). They are enforced by the Attorney General on behalf of the Crown and are regulated by the Charity Commission. Public benefit is a key requirement under the Charities Act 2011. Political purposes are not charitable (National Anti‑Vivisection Society v IRC [1948]), although political activity that is merely ancillary to a charitable purpose does not invalidate a charity. Charitable trusts are not subject to the beneficiary principle in the same way as private trusts because they are enforced in the public interest.

2. Specific Non-Charitable Purpose Trusts (Anomalous Exceptions): These are a limited category of private purpose trusts recognised historically as valid despite lacking human beneficiaries. As trusts of imperfect obligation, they are strictly confined by case law and must be limited in duration so as not to offend the rule against inalienability (see below). Examples include:

   • Trusts for the maintenance of specific animals (e.g., Re Dean (1889)). Duration must not exceed the perpetuity period; the courts may take judicial notice of an animal’s lifespan (Re Haines (1952) — a cat cannot live longer than 21 years).
   • Trusts for the erection or upkeep of tombs and monuments (e.g., Mussett v Bingle (1876); Re Hooper [1932]). A direction to build a monument is valid if the expenditure can be made without tying up capital indefinitely, whereas a direction to maintain the monument must be time-limited (often 21 years) to avoid inalienability. Small sums for a grave’s upkeep have been treated as valid testamentary expenses (Pirbright v Salwey (1896)).
   • Trusts for the saying of private masses (Bourne v Keane [1919]).
   • A historic decision upheld a trust to advance foxhunting (Re Thompson [1934]), but the Hunting Act 2004 renders that purpose unlawful today; a trust for an illegal purpose will be void. These exceptions are anomalous and courts are reluctant to extend them (Re Endacott [1960]).

3. Trusts for the Benefit of Ascertainable Individuals (Re Denley Trusts): A trust expressed as being for a purpose may be valid if the purpose directly or indirectly benefits ascertainable individuals who could enforce the trust (Re Denley’s Trust Deed [1969]). For example, a trust to maintain a sports ground for the use of employees of a company. The individuals must be ascertainable, and the trust must comply with the perpetuity rules. Re Denley bridges the “beneficiaries versus purposes” divide by identifying real persons with sufficient interest to sue. The class cannot be hopelessly wide, and the trust must be administratively workable.

Key Term: Re Denley Trusts
Purpose-form trusts that confer a direct or indirect, tangible benefit on an ascertainable class of persons. Valid as private trusts because those persons have standing to enforce trustee duties.

Key Term: Contract-holding Gift
A gift to the members of an unincorporated association, to be held subject to their contractual rights and obligations under the association’s rules. The property is treated as an accretion to the association’s funds (e.g., Re Recher [1972]; Re Horley Town Football Club [2006]).

A frequent exam-adjacent scenario involves gifts to unincorporated associations. As an association has no separate legal personality (unless incorporated), a gift “to the club” may fail if treated as a non-charitable purpose trust. However, courts often construe such gifts in one of three ways (Neville Estates v Madden [1962]):

• As a gift to current members beneficially (identifies persons).
• As a contract-holding gift for members for the time being, subject to the rules (valid without engaging the beneficiary principle).
• As a trust for the association’s purposes (likely to fail unless charitable).

Where members have no power to control or divide the property (e.g., where rules vest control in an external body), an accretion may offend the rule against inalienability (Re Grant’s Will Trusts [1979]).

Worked Example 1.1

A testator leaves £50,000 in his will 'on trust for the purpose of campaigning for stricter laws on animal cruelty'. Is this trust valid?

Answer:
This trust is likely void. Campaigning for a change in the law is generally considered a political purpose, which is not charitable. As a non-charitable purpose trust, it would need to fall into the anomalous exceptions or the Re Denley category. It does not fit the anomalous exceptions. It might be argued it indirectly benefits animals (and perhaps people who care about them), but the primary purpose is political campaigning, which lacks the direct and tangible benefit to ascertainable individuals required for a Re Denley trust. It likely fails the beneficiary principle.

Worked Example 1.2

“I give £10,000 to my local chess club to advance chess among residents.” The club is an unincorporated association. Is the gift valid?

Answer:
The gift can be construed as a contract-holding gift (Re Recher; Re Horley Town Football Club). On this footing, it is a gift to the members for the time being, subject to the club’s rules, and is valid. If drafted as a trust “to advance chess” without conferring benefit on members or being charitable, it risks the beneficiary principle. Proper construction as an accretion to members’ funds avoids that risk.

The Rule Against Perpetuities

The rule against perpetuities exists to prevent property being tied up within trusts for an excessively long period, making it inalienable (unable to be sold or transferred freely). It ensures that property ultimately becomes available for commerce and use by future generations. There are two limbs to the rule relevant to trusts:

1. The Rule Against Remoteness of Vesting: Concerns when beneficial interests must vest.
2. The Rule Against Inalienability: Concerns trusts that render capital inalienable for too long (primarily relevant to non-charitable purpose trusts and some gifts to unincorporated associations).

Rule Against Remoteness of Vesting

This rule requires that equitable interests under a trust must vest (become certain to belong to someone) within the perpetuity period. If there is a possibility that an interest might vest outside this period, the gift may be void under traditional rules. Modern law uses ‘wait and see’ so gifts are not voided by remote possibilities that never materialise.

Key Term: Rule Against Perpetuities
A set of legal rules designed to prevent property from being tied up in trust, or subject to contingent interests, for an excessive period.

Key Term: Perpetuity Period
The maximum duration allowed for a trust interest to remain contingent before it must vest.

The Perpetuities and Accumulations Act 2009 (PAA 2009) applies to trusts taking effect on or after 6 April 2010. It simplifies the rules:

• It establishes a single statutory perpetuity period of 125 years. Settlors cannot specify a different period for trusts within the Act’s scope.
• It introduces a 'wait and see' rule. An interest is only void if it actually fails to vest within the 125-year period. Gifts are no longer void at the outset based on hypothetical remote possibilities.

For trusts created before 6 April 2010, older rules apply: at common law, the perpetuity period was calculated by reference to lives in being plus 21 years, and under the Perpetuities and Accumulations Act 1964 a settlor could specify up to 80 years, with a statutory ‘wait and see’ regime. In exam settings, focus primarily on the PAA 2009 unless you are given a pre‑2010 trust.

Key Term: Remoteness of Vesting
The rule requiring that beneficial interests under a trust must vest (become certain) within the perpetuity period.

Charitable trusts have special treatment in this context:

• The inalienability limb does not apply to charities (see below).
• As to remoteness of vesting, an initial gift to charity must vest within the relevant period, but a gift over from one charity to another is valid at any distance in time (charity-to-charity exception). For example, “to X charity so long as used for the charity’s purposes, and if not, then to Y charity” can operate indefinitely.

Worked Example 1.3

A trust created in 2023 provides property 'to my first grandchild to qualify as a solicitor'. At the time the trust is created, the settlor has no grandchildren. Is this gift valid under the rule against remoteness of vesting?

Answer:
Yes, the gift is likely valid under the PAA 2009. The perpetuity period is 125 years. We 'wait and see' if a grandchild qualifies as a solicitor within that period. If one does, the gift vests and is valid. If no grandchild qualifies within 125 years, the gift will fail at that point, but it is not void from the start.

Worked Example 1.4

A will executed in 2008 leaves “£100,000 to my first great‑grandchild who attains 30.” The testator dies in 2009. Is the gift valid?

Answer:
This disposition takes effect before 6 April 2010, so the pre‑2010 rules apply. Measured against lives in being plus 21 years, there is a possibility that the first great-grandchild attaining 30 could be beyond the period (depending on the measuring lives). Under the 1964 Act, ‘wait and see’ may apply if the will specified a fixed period (up to 80 years), but absent such specification, the common law period may render the gift too remote. Unless appropriate measuring lives or a specified period brings vesting within time, the gift risks being void for remoteness. Under today’s PAA 2009 regime, a similar clause would generally be saved by the 125-year period and ‘wait and see’.

Rule Against Inalienability

This rule primarily affects non-charitable purpose trusts (the anomalous exceptions like trusts for animals or tombs) and some gifts to unincorporated associations. It prevents capital from being locked up and rendered inalienable (untouchable) for longer than the common law perpetuity period (usually lives in being plus 21 years, or a fixed 21 years if no relevant lives are chosen). The period under PAA 2009 does not replace the common law inalienability limits for non-charitable purpose trusts.

Key Term: Inalienability Rule
The rule preventing trust capital from being rendered incapable of transfer (inalienable) for a period longer than the perpetuity period. Primarily applies to non-charitable purpose trusts.

Charitable trusts are generally exempt from this rule because capital can be applied for charitable purposes indefinitely. The 125-year period under PAA 2009 does not apply to inalienability for non-charitable purpose trusts. A non-charitable purpose trust will be void if it is intended, or could potentially, last longer than the relevant perpetuity period (e.g., “forever” or beyond lives in being plus 21 years).

For tomb maintenance, the distinction matters:

• A gift to build a monument is typically valid if the expenditure can be made outright (Mussett v Bingle).
• A gift to maintain a monument must be limited to a period compatible with inalienability (e.g., 21 years: Re Hooper).

Gifts to unincorporated associations can also engage inalienability. If the gift is constructed so that members have no control or ability to divide or use the property under their contract (e.g., where rules place control in an external body), capital may be tied up and the gift may fail (Re Grant’s Will Trusts).

Worked Example 1.5

“My trustees shall hold £20,000 to keep my tomb and plot in perfect order forever.” Is this clause valid?

Answer:
No, because it ties up capital “forever” in a non-charitable purpose trust, offending the rule against inalienability. If framed as a limited trust (e.g., “for 21 years”), the maintenance clause can be valid (Re Hooper). A small sum treated as a testamentary funeral expense may also be valid without engaging the rule (Pirbright v Salwey).

Exam Warning

Do not confuse the two perpetuity rules. Remoteness of vesting applies to when interests must vest for beneficiaries (usually individuals) and uses the 125-year period (post-2010). Inalienability applies mainly to non-charitable purpose trusts and prevents capital being tied up, using the common law period (often 21 years). Charitable trusts are largely exempt from both, provided they are genuinely charitable.

Key Point Checklist

This article has covered the following key knowledge points:

• The beneficiary principle requires most private trusts to have ascertainable human beneficiaries capable of enforcing the trust.
• Trusts for abstract non-charitable purposes generally fail unless they fall within recognised exceptions (charitable trusts, specific anomalous non-charitable purpose trusts, Re Denley trusts).
• Trusts of imperfect obligation are narrowly confined categories (animals, tombs, private masses) and must be time-limited to avoid inalienability.
• Gifts to unincorporated associations are often saved as contract-holding gifts (association funds subject to rules) or as gifts to members, avoiding the beneficiary principle; lack of member control can engage inalienability.
• The rule against perpetuities prevents property being tied up in trust for too long.
• The rule against remoteness of vesting requires interests to vest within the perpetuity period (125 years for trusts post-April 2010 under PAA 2009, subject to 'wait and see').
• The rule against inalienability restricts the duration of non-charitable purpose trusts, typically to 21 years or lives in being plus 21 years.
• Charitable trusts have special status: they are enforced by the Attorney General, are exempt from inalienability, and enjoy the charity-to-charity exception for remoteness of vesting.

Key Terms and Concepts

• Beneficiary Principle
• Rule Against Perpetuities
• Perpetuity Period
• Remoteness of Vesting
• Inalienability Rule
• Trusts of Imperfect Obligation
• Re Denley Trusts
• Contract-holding Gift

Key Term: Trusts of Imperfect Obligation
Narrow non-charitable purpose trusts recognised by case law (e.g., care of specific animals, tombs, private masses). Valid but not generally enforceable by beneficiaries; must be time-limited to avoid inalienability.

Key Term: Re Denley Trusts
Purpose-form trusts that confer a tangible benefit on an ascertainable class of persons who can enforce the trust; valid as private trusts if the class is certain and the arrangement is administratively workable.

Key Term: Contract-holding Gift
A gift to members of an unincorporated association, held subject to their contractual rights and obligations under the rules of the association; treated as an accretion to the association’s funds rather than a purpose trust.