Core principles of trust law - Charitable and non-charitable...

Learning Outcomes

After studying this article, you will be able to explain the beneficiary principle and its application to private trusts, distinguish between charitable and non-charitable purpose trusts, identify when a purpose trust is valid, and advise on the requirements for valid charitable trusts, including the public benefit test. By the end, you will be able to analyse fact patterns to assess the validity of purpose trusts for SQE2 scenarios.

SQE2 Syllabus

For SQE2, you are required to understand how core trust law principles apply to charitable and non-charitable purpose trusts. Your revision should be focused on the following:

• The beneficiary principle: why most trusts must have identifiable beneficiaries.
• The rules rendering non-charitable purpose trusts generally void, with narrow exceptions.
• The limited categories of valid non-charitable purpose trusts.
• The strict perpetuity requirement for private purpose trusts.
• The requirements for a valid charitable trust: exclusively charitable purpose and public benefit.
• How to determine whether a given subject matter creates a valid charitable trust, a non-charitable purpose trust, or fails as a trust altogether.
• The main legal differences between charitable and non-charitable purpose trusts, especially enforcement and perpetuity.

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. What is the beneficiary principle and how does it affect non-charitable purpose trusts?
2. Name one circumstance where a non-charitable purpose trust can be valid.
3. What conditions must a trust meet to be charitable?
4. True or false? A trust for a private animal is always charitable.
5. Which legal requirement prevents non-charitable purpose trusts from lasting for 125 years?

Introduction

Trust law recognises both private express trusts and trusts created for a purpose. However, a fundamental rule—the beneficiary principle—states that, except in limited cases, every trust must have ascertainable human beneficiaries who can enforce the trust. This principle invalidates most non-charitable purpose trusts. Charitable purpose trusts are a major exception, provided they comply with strict statutory conditions.

This article examines the requirements for both charitable and non-charitable purpose trusts, the narrow exceptions to the general rule, and the public benefit requirement for charities.

Non-Charitable Purpose Trusts

The Beneficiary Principle

The core of private trust law is the beneficiary principle. Without identifiable beneficiaries to benefit from and enforce the trust, no valid (non-charitable) private trust arises.

Key Term: beneficiary principle
All private trusts must have human beneficiaries who can enforce the trust. Otherwise, the trust is generally void.

A disposal on trust for a purpose rather than persons is—unless charitable or exceptionally saved—invalid because no one can hold trustees to account, and the court cannot supervise performance.

Valid Non-Charitable Purpose Trusts: Narrow Exceptions

Non-charitable purpose trusts are, as a rule, void, save for a few strictly limited categories recognised by case law. These exceptional categories, confirmed in Re Endacott and similar cases, are:

• Trusts for tombs and monuments (provided the trust is limited in duration)
• Trusts for the saying of private masses
• Trusts for the maintenance of specific animals

A valid non-charitable purpose trust must also satisfy two other criteria:

1. The trust must not exceed the perpetuity period (usually 21 years from creation).
2. The trust must specify a purpose previously upheld by the courts and be certain in meaning.
3. There must be a human willing and able to carry out the purpose.

Key Term: perpetuity period
For non-charitable purpose trusts, the duration must not exceed the applicable perpetuity period (lives in being plus 21 years, or strictly 21 years if no lives in being).

Key Term: Re Endacott categories
The limited types of non-charitable purpose trusts recognised as valid, including tombs, private masses, and specific animals.

Worked Example 1.1

A will leaves £3,000 to trustees "to maintain my dog Bruno as long as he lives." Is this trust valid?

Answer:
This is a non-charitable purpose trust for the maintenance of a particular animal. Such trusts are valid if not exceeding the animal’s natural lifespan—here, the court will take "judicial notice" that a dog cannot live beyond 21 years, saving the trust from the perpetuity objection.

Non-Charitable Purpose Trusts: Other Features

• Trusts for purposes benefiting the public at large but not falling within the Re Endacott exceptions, such as "to advance world peace," are invalid, because they lack ascertainable human beneficiaries and do not meet the charitable requirements.
• Maintenance of public parks or amenities is generally charitable (see below), not a valid private purpose trust, unless kept within strict Re Endacott categories and time limits.
• Trusts for general memorials (e.g., "to create a useful monument to myself") are void for uncertainty and as outside recognised categories.

Exam Warning

Private trusts for purposes outside the narrow Re Endacott categories are void. Do not confuse these with gifts that may be construed as charitable or with gifts to named individuals.

Revision Tip

If an SQE2 scenario involves a trust for a pet, private mass, or tomb, check first whether it is expressly time-limited or falls within an animal’s natural lifetime. If not, the trust is likely void.

The Re Denley Principle: Purpose Trusts with Indirect Beneficiaries

The courts recognise some "purpose" trusts as valid if, although expressed as for a purpose, their performance directly or indirectly benefits ascertainable individuals, who may enforce the trust.

Worked Example 1.2

A will leaves land on trust "to be used as a sports field for the staff employees of my former company for 20 years." Is this valid?

Answer:
This satisfies the Re Denley exception: there is a defined group (company staff) that directly benefits and may enforce the trust, and the duration does not exceed 21 years. Such a trust is valid.

Charitable Purpose Trusts

Requirements for a Charitable Trust

Charitable trusts are an exception to the beneficiary principle. They must:

• Be for exclusively charitable purposes (as defined by statute and case law), and
• Provide a public benefit.

Key Term: charitable purpose
A purpose recognised by law as charitable, including relief of poverty, advancement of education, religion, health, animal welfare, and other purposes listed in the Charities Act 2011.

Key Term: public benefit
The trust’s effect must benefit the public, or at least a sufficiently large section, not a closed group or individuals united only by personal connection.

Statutory Categories of Charitable Purpose

The Charities Act 2011 lists accepted categories, including:

• Relief of poverty
• Advancement of education
• Advancement of religion
• Advancement of health
• Advancement of animal welfare
• Advancement of environmental protection
• And others (set by statute or judicially recognised)

A trust can be charitable if its objects fit within any of these headings.

Public Benefit Requirement

A charitable trust must benefit the public, not merely individuals with a "personal nexus" such as employees of a company or a family. Public benefit includes tangible, positive effects but excludes exclusively political objects.

Worked Example 1.3

A trust fund is left "to provide university scholarships for the children of the Smith family." Is this a valid charitable trust?

Answer:
No. Although advancement of education is charitable, the class—Smith family children—is too narrowly drawn and consists of individuals connected by blood. There is no sufficient section of the public, so the trust fails for lack of public benefit.

Enforcement and Supervision

Charitable trusts are supervised by the Attorney-General (not beneficiaries), may last indefinitely (no perpetuity period), and obtain favorable tax status. Non-charitable purpose trusts are neither supervised by public authorities nor benefit from such features.

Key Term: Attorney-General (in charity law)
The official responsible for enforcement and supervision of charitable trusts on behalf of the public.

Summary: Comparing Charitable vs Non-Charitable Purpose Trusts

Key Point Checklist

This article has covered the following key knowledge points:

• The beneficiary principle requires private trusts to have human beneficiaries unless charitable or within strict Re Endacott exceptions.
• The only valid non-charitable purpose trusts are for tombs/monuments, private masses, and maintenance of specific animals, and only if limited in duration.
• Perpetuity rules require private purpose trusts to terminate within 21 years; the 125-year rule does not apply.
• Charitable trusts must advance a recognised charitable purpose and provide a public benefit.
• The public benefit doctrine requires a sufficient section of the public to benefit (not a closed group).
• Charitable trusts are supervised by the Attorney-General and can last indefinitely.

Key Terms and Concepts

• beneficiary principle
• perpetuity period
• Re Endacott categories
• charitable purpose
• public benefit
• Attorney-General (in charity law)