Differences between private trusts and charitable trusts The differences include: Private trusts can be enforced by their Beneficiaries enforcing the - beneficiaries. Charitable trusts have no identifiable beneficiaries to enforce the trust. In express trusts, the certainty tests apply. In charitable trusts, the Certainty Tests – test for validity is whether the trust is for a charitable purpose and for public benefit. Unless the trust instrument directs, beneficiaries of Trusts cannot be changed – private trusts cannot be changed. The doctrine of The doctrine of allows the cy-pres Court to vary charitable trusts. Private trusts cannot extend to perpetuity. Charitable Rule against perpetuities – Trusts are not subject to this rule. Private trusts and charitable trusts have different taxation implications. Taxation – Requirements: The charitable purpose must be for public benefit and this must be positively Purpose - established. These are two distinct elements: Charitable Purpose’ ‘A The has been accepted as law in Australia in Statute of Charitable Uses 1601 addition to the generals head unders Income Tax Special Purposes [1891] AC 5531 Commissioenrs v Pemsel – The relief of Poverty The advancement of education; The advancement of religion; and Other purposes beneficial to the community Section of the Public’ ‘A [1930] VLR 211 Re Income Tax Acts (No 1) Typically called a of the public’ YES - Large groups of persons – ‘section because of the size of the group Unlikely to be held as of the NO - Very Small Groups of People – ‘section public’ per [1945] Ch 123 Re Compton; Powell v Compton Not a section of the public NO - Members of groups such a clubs etc – because their group is defined by memberships which place a bar on membership. Not sections of a public, regardless if its NO - Personal relationships – relationship with charity as the scope is not sufficiently enough. ‘public’ [1951] AC 297 Oppenheim v Tobacco Securities Trust Co Ltd Lord Simonds described of a trust as’ ‘section The potential beneficiaries must not be numerically negligible
Differences between private trusts and charitable trusts The differences include: Beneficiaries enforcing the - Private trusts can be enforced by their beneficiaries. Charitable trusts have no identifiable beneficiaries to enforce the trust. Certainty Tests – In express trusts, the certainty tests apply. In charitable trusts, the test for validity is whether the trust is for a charitable purpose and for public benefit. Trusts cannot be changed – Unless the trust instrument directs, beneficiaries of private trusts cannot be changed. The doctrine of The doctrine of cy-pres allows the Court to vary charitable trusts. Rule against perpetuities – Private trusts cannot extend to perpetuity. Charitable Trusts are not subject to this rule. Taxation – Private trusts and charitable trusts have different taxation implications. Requirements: Purpose - The charitable purpose must be for public benefit and this must be positively established. These are two distinct elements: ‘A Charitable Purpose’ The Statute of Charitable Uses 1601 has been accepted as law in Australia in addition to the generals head unders Income Tax Special Purposes Commissioenrs v Pemsel [1891] AC 5531 – The relief of Poverty The advancement of education; The advancement of religion; and Other purposes beneficial to the community ‘A Section of the Public’ Re Income Tax Acts (No 1) [1930] VLR 211 YES - Large groups of persons – Typically called a ‘section of the public’ because of the size of the group NO - Very Small Groups of People – Unlikely to be held as ‘section of the public’ per Re Compton; Powell v Compton [1945] Ch 123 NO - Members of groups such a clubs etc – Not a section of the public because their group is defined by memberships which place a bar on membership. NO - Personal relationships – Not sections of a public, regardless if its relationship with charity as the scope is not sufficiently ‘public’ enough. Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 Lord Simonds described ‘section of a trust as’ The potential beneficiaries must not be numerically negligible
Trusts_Summary.docx