Features Of A Charitable Trust: Trust is an equitable obligation created by a party known as the testator or settlor and imposed on a party known as the trustee to deal with the trust property in accordance with the trust deed which is the constitution of the trust, for the benefit of the beneficiaries.
Trusts can be classified into private trusts and public trusts. Charitable trust is otherwise known as public trust.
Charitable trust is from the word, charity which implies doing something altruistic for the benefit of the society and in compliance with the law.
Charitable trust is an equitable obligation imposed on a trustee to comply with the instructions in the trust deed for the benefit of some named object recognized by law. The court is always meticulous in ascribing a trust as charitable due to the benefits accruable to the trust.
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Advantages Of Charitable Trusts
1. Enforcement: Public trust by the virtue of being of public concern can be enforced by the Attorney-General or the Administrator General of Public Trustee. Private individuals cannot therefore compel an executor of a public trust to enforce the trust by an action in court even when they are the beneficiaries of the trust.
2. Fiscal advantage: This is a major reason why the court is always reluctant to ascribe a trust as charitable. A charitable trust is not subjected to tax payment except for Value Added Tax on goods and services which do not have tax exemption.
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3. Rules of Perpetuity: The rule of perpetuity does not operate against charitable trusts. This means that a public trust can run in perpetuity, unlike private trusts which operates for not more than 21 years. This is on the basis of the fact that charitable trusts are said to be incapable of being fulfilled. The purpose of the trust can always remain valid and continuing.
4. Certainty of Objects: Unlike in private trusts, a charitable trust does not need to pass the test of certainty of object in order to be valid. Therefore, even when the objects are not certain, the trust will remain valid and will not fall back in resulting trust to the estate of the settlor or testator.
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Characteristics/Features Of A Charitable Trust
Features of a charitable trust are those inherent characteristics that must be present and operative for a charitable trust to be valid.
There are three essential features of charitable trusts which are:
1. The trust must be of charitable nature
2. The trust must be of public benefit
3. The trust must be exclusively charitable
1. Charitable Nature: This means that the trust must be definitive of what charity actually entails. Lord Mcnaughten enumerated four classifications of charity in the case of Pamsel V Commissioner of Income Tax. They are:
(i). Trust for the Relief of Poverty:
Generally, for a charitable trust to be valid there must exist no personal relationship between the settlor and the beneficiaries. Trust for the relief of poverty is an exception to this rule. Thus, trust created for the relief of poverty remains valid even when there exist personal relationship between the donor and the beneficiaries. The relief of poverty meant here is not necessarily that the objects of the trust must be of extreme poverty.
(ii). Trust for the Advancement of Education: Under this head, there must exist no personal nexus between the donor and the beneficiaries of the trust. This fold of trust emanated from the preamble of the Statute of Charitable Uses 1601 which makes provision for the maintenance of schools and so on. Certain trusts have been held to be valid under this head. In Re Standford, the court held to be valid a trust created for the production of dictionaries.
Similarly, in Re Hopkin’s Will Trust¸ the court held as valid a trust created in favour of Francis Bacon Society for the search of Shakespeare Manuscript. The court noted that the trust was definitely going to be beneficial to education.
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(iii). Trust for the Advancement of Religion: This equally requires that there must be no nexus between the donor and the beneficiaries. The origin of this fold of trust emanated from the preamble of the Statutes of Charitable uses which made provision for the repair of churches. The practice of the religion here must implicate the three elements of religion: Belief, Faith and Worship. Also, the tenets of the religion must be morally right, and it must be only for religions that believe in one God.
In Iyanda V Ajike, a trust created for the maintenance of a family prayer room was held not to qualify as a valid charitable trust because it is a private mosque.
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(iv). Trust for other purposes that are beneficial to the society: Here, the law allows the court a wide range of discretion to ascribe a trust as charitable as long as the purpose is analogous to the provisions of the preamble of the Statutes of Charitable Uses. The courts here are equally meticulous in ascribing a trust as charitable. In Williams’ Trustees V IRC, the court held that a trust created for the benefit of the Welsh people in London was not charitable due to the unreasonable nature of the restriction as to the class of people to benefit from the trust, “The Welsh people in London”.
In Re Wokingham Fire Brigade, the court held as valid trust created for the protection of human life and properties. In Scottish Burial Reform and Cremation Society V Glasglow Corporation, a trust created for the provision of cremation materials to the public was held valid.
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2. Public Benefit: A charitable trust to be valid must pass the public benefit test. All that is required is that the trust must be beneficial to a reasonable section of the public. There must also exist no nexus between the donor and the beneficiaries unless the trust is for the relief of poverty. Thus, In Dingle V Turner, a trust created for the payment of the employees and former employees of E. Dingle & Co Ltd who are mentally incapacitated or above 60 years, was held to be charitable even though there existed a nexus (employer-employee relationship) between the donor and the beneficiaries.
In Iyanda V Ajike, a trust created for the maintenance of a family prayer room was held not to qualify as a valid charitable trust because it is does not benefit the public. It was shown that the public were not admitted to worship in the mosque.
In Oppenhein V Tobacco Securities Trust Co, a trust created for the education of the children of the British-American Tobacco Co. Ltd employees and former employers, was held not charitable due to the personal nexus existing and for the fact that the beneficiaries do not constitute a significant section of the society.
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3. Exclusively Charitable: The requirement of exclusively charitable implies that a charitable trust created, to be valid, must be charitable and nothing more pretentious. It must not be a mixture of charitable and non-charitable. To this extent, a trust which benefits both the private and the public will be invalid in non-fulfillment of the requirement of exclusively charitable. There cannot be a mixture of a private trust and a charitable trust. Thus, in Re Macduff, a trust created to charitable or philanthropic purpose was held invalid because, not all philanthropic purposes are charitable. Ascribing the trust as charitable will give room for the executor to apply the trust to non-charitable objects.
There are however, some exceptions to the strict application of the exclusively charitable requirement.
One is that where there are purposes which are incidental to the fulfillment of a charitable trust, the possible application of the trust funds to such purposes does not defeat its charitable nature. Thus, in Re Coxen, a trust created which prescribed a particular sum to be mapped out for dinner during meetings for the execution of the trust was held valid and charitable, regardless.
Another exception is the principle of apportionment. Here, the rule says that where it is possible to severe the extent of the trusts created for charitable objects from the non-charitable objects, or where they are certain, the maxim, “Equality is Equity” will apply to share the trust fund equally.
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Conclusion
Charitable trusts are matters of concern to the public. One is that the trust seeks to provide solutions to the public in exchange for taxman’s money. Thus, charitable trusts are exempted from tax payment. The law is mindful of the practice of people having a personal entitlement in the disguise of a charitable trust in order to avoid tax, hence its meticulous attitude in ascribing a trust as charitable. In doing so, the courts do critically scrutinize the trust created and ensures that the necessary features of a charitable trust are all present.
Edeh Samuel Chukwuemeka, ACMC, is a lawyer and a certified mediator/conciliator in Nigeria. He is also a developer with knowledge in various programming languages. Samuel is determined to leverage his skills in technology, SEO, and legal practice to revolutionize the legal profession worldwide by creating web and mobile applications that simplify legal research. Sam is also passionate about educating and providing valuable information to people.