Charitable trust
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- This article considers charitable trusts so far as they are distinct from other types of charity. For an article on charities generally, see Charities.
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A charitable trust is a trust organized to serve private or public charitable purposes. Charities may take the form of charitable trusts, companies or unincorporated associations. For a general discussion, see Charities.
Because of the benefits provided by charitable trusts, they are subject to certain benefits under trust law. For example, transfers of property to a charitable trust are usually exempt from the rule against perpetuities, which would otherwise operate to void a transfer made after a certain period. Furthermore, charitable trusts come under the doctrine of cy pres, which holds that if the charity designated in the trust ceases to exist or otherwise becomes unable to carry out the purpose of the trust, then the trust property can be transferred to another charity with a similar purpose.
Under UK law for a trust to be charitable it must fall into one of the "classifications", as described by Lord McNaughten, in the case of Commissioners for Special Purposes of Income Tax v Pemsel (1891). The four heads of charity described were the relief of poverty, the advancement of education, the advancement of religion, and other purposes beneficial to the community. For a purpose to fall into the final category the courts will usually refer to the preamble of the Charitable Uses Act 1601, and decide by analogy to the purposes listed there. An example of this is the case of Vancouver Regional Freenet Association v Minister of National Revenue (1996), where free internet access was likened by analogy to the repair of highways found in the preamble to the Charitable uses Act 1601.
Charitable contributions are also a way, if tax deductions are available, to redirect money that would go into taxes, into charity.
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