Charitable Trusts – An Exception to every Rule

October 12, 2012 Hull & Hull LLP Estate & Trust Tags: 0 Comments

 

In my blog yesterday I discussed how the Stanley Cup is held on a charitable trust. While I touched briefly on the law surrounding what constitutes a charitable trust, my review left me wanting to further explore the topic. It is for this reason that I have come back to the topic today.

What makes charitable trusts so interesting is that they offer exceptions to so many of the most basic rules of trust law. Under normal circumstances, in order to have a valid trust you must have what are known as the “three certainties”. They are:

1.     The Certainty of Intention (the settlor must have intended to create a trust);

2.     The Certainty of Subject Matter (you must know what property is subject to the trust); and

3.     The Certainty of Objects (you must know who the beneficiaries of the trust are).

Charitable trusts are so interesting because from the get go they do away the third requirement of the three certainties, namely that you do not need to be able to identify who the beneficiaries of the trust are. Under most circumstances, the court requires the beneficiaries of a trust to be easily identifiable so as to ensure, amongst other things, that there is someone to ensure that the trust is properly administered by the trustees. In the case of a charitable trust, this problem is overcome by having the Crown act as parens patriae (parent of the nation) of the trust, with the idea being that the state will step in to ensure that the trust is properly administered.

As mentioned yesterday, a charitable trust is roughly defined as the “exclusive dedication of property to a charitable purpose in a way that provides a public benefit”. Within this, the law has recognized four subcategories of what constitutes a “charitable purpose”, being (i) the relief of poverty; (ii) the advancement of education; (iii) the advancement of religion; and (iv) “other purposes beneficial to the community”. As a result, so long as the settlor of the charitable trust donates the property for the exclusive use of one of the four “charitable purposes” delineated above, in a fashion that provides a “public benefit”, the charitable trust is valid, and can be found to exist.

Thank you for reading.

Stuart Clark

For more information on the three certainties, please see the excellent blog post from Ian Hull on the topic.

 

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