A “purpose trust” has the objective of promoting a particular purpose. It may or may not be for the benefit of a person or a class or persons. A purpose trust is enforceable if it is for charitable purposes.
A limited category of non-charitable purpose trusts is recognised as valid, subject to compliance with conditions mentioned below. Subject to these exceptions, purpose trusts are not enforceable.
In order to be enforceable, a trust must be in terms such that the court is able to oversee its enforcement. What constitutes a breach or not, must be evident.
A difficulty with purpose trusts is that no one is available to enforce them. In contrast, the Attorney General may enforce charitable trusts. A further objection is that the trust may endure indefinitely. The former rule against perpetuities invalidated arrangements which tied up assets and kept them inalienable for periods beyond the perpetuity period.
Many purpose trusts are uncertain in scope and avoided in these grounds alone. Most trusts which are created for broad and generalised purposes are regarded as insufficiently certain, to be enforced.
A purpose trust without a human beneficiary would be too uncertain to permit enforcement. It would also tie up property for prolonged periods of time. For these reasons, such trusts are against public policy. A number of limited exceptions to the invalidity of purpose trusts have been permitted by the courts of equity and by statute.
Exceptions Where Valid
The Charities Act provides that gifts made for the maintenance or improvement of tomb, vault, grave or tombstone or another memorial to a deceased person/ persons which, are not otherwise charitable, are deemed charitable (and therefore enforceable). However, there are outdated capital and annual monetary value limits to the income. There have been proposals to increases the limits for tombs.
Outside of the above limits, there exists an exception at common law by which gifts for a tomb or monument and its maintenance may be valid, provided that it does not restrict the rule against inalienability. The courts have been prepared historically to uphold such gifts for the perpetuity period.
Trusts for the maintenance of particular animals for a perpetuity period of 21 years have been upheld. This is regarded as an anomaly, but is well-established. Courts are not willing to measure the perpetuity period with reference to the life of animals, so that the “perpetuity” period is limited to 21 years.
Gifts for the benefit of a particular company are permissible as the company may endure perpetually and there should always be an entity available to enforce it. Gifts to incorporated clubs are therefore valid even if their purposes are not charitable.
Clubs and Associations
Clubs, societies and other bodies which are not incorporated, consist of the body of persons who are members from time to time. May gifts for the benefit of such bodies infringed the rules against perpetuity, being for the benefit of a present and future class of persons.
While the rules against perpetuity existed, the Irish courts sought to save gifts to clubs and bodies such as religious communities, by interpreting them as being made to the head of the organisation for the time being or to be gifts to the members at the date of the gift or the date of death, in the case of a gift by will. Gifts to religious congregations which did not engage in purposes for the benefit of the community (for example, a contemplative order) were saved by the latter interpretation. The Charities Act now provides that gifts to contemplative orders are deemed charitable.
These interpretations might be contrary to the probable intention of testators, who generally intended to benefit of the club, order or institution as a whole. However, the interpretations saved the gifts from being wholly void. This more liberal interpretation differed from the general approach of the English courts, which tended not to strain interpretation, but were likely to lead to the gift being found to be invalid.
The English Courts have taken a more liberal approach in recent years, tending to uphold the gift by interpreting it to be limited to an existing class, rather than purporting to extend to future members. In accordance with this approach, the English Courts have upheld gifts to clubs and similar bodies, as limited to the persons comprising such clubs and bodies at the date of the gift.
The English Courts have also allowed the possibility that gifts to clubs and societies might be gifts for the members for the time being, but subject to the terms and conditions of their rules. The English Courts, in which the perpetuity rules are still applicable, rationalise that the members of the club could terminate the club by agreement at any point. It is not clear if these cases will be upheld by the UK Supreme Court.
McMahon Legal, Legal Guide Limited and Paul McMahon have no liability arising from reliance on anything contained in this article nor on this website.