This month we will have a series of blogs that focus on charities. As today is the first day of the month I thought why not start off at the very beginning. What even is a “charity” and how does it relate in any way to trust and estate law?
At its most basic a charity is a trust that is set up for a particular charitable purpose. Like all trusts a charitable trust must adhere to the “three certainties”, which are:
- Certainty of Intention – It must be clear the settlor intended to create a trust;
- Certainty of Subject Matter – It must be clear what assets are to form part of the trust; and
- Certainty of Objects – It must be clear who has an interest in the trust.
Trusts that are established for a charitable purpose are given special exceptions for the “Certainty of Objects” requirement which allow a charitable trust to be valid when a normal private trust would fail. Normally, the certainty of objects would require it to be clear who the potential beneficiaries of the trust are so they may in theory keep the trustee accountable and enforce their potential interests in the trust. This of course is not possible for a charitable trust in the classic sense, for who the “beneficiaries” of a charitable trust would be is not as easily defined. In the case of a charitable trust the certainty of objects can be established if it is found the trust has been settled for a “charitable purpose” that provides a “public benefit”.
Charitable trusts are also provided special rules regarding the perpetuity of the trust which do not apply to other private trusts. I have previously blogged about the rule against perpetuities, which at its most basic requires all property in the trust to fully vest in the beneficiaries no later than 21 years after the death of a life in being alive at the creation of the trust. If such a requirement was to apply to a charitable trust it would result in all funds in the charity having to be distributed and the charity wound up no later than 21 years after the death of a life in being alive at the founding of the charity. Luckily for charities however, the rule against perpetuities does not apply to charitable trusts, thereby potentially allowing the trust to exist in “perpetuity” (i.e. forever).
Thank you for reading.