This chapter explores how the creation of trusts is influenced by special considerations of public policy, focusing on charity that is beneficial to the public as opposed to illegality. Charity will render a purpose trust valid that the law of trusts would otherwise consider to be void. In contrast, illegality will sometimes render an interest or transaction void or unenforceable that the law of trusts and gifts would generally consider to be valid. After considering the creation of charitable trusts, the chapter also discusses charitable purposes and the public benefit as well as the administration of charitable trusts, before concluding by analysing their variation in accordance with the ‘cy-près’ doctrine.
Chapter
7. Charity: trust creation and public policy II
Chapter
8. Policy limits
This chapter describes some policy limits in the law of equity. The rule against perpetuities prevents owners tying their property up outside of the market for too long a period, otherwise known as the ‘perpetuity period’. The rules of perpetuity also account for accumulations and inalienability. Meanwhile, conditional and determinable interests, where the conditions are designed to influence the beneficiaries’ behaviour in a way that is contrary to public policy, are also restricted. Legislation also provides that trusts may be set aside if they are established with the object of defrauding the creditors of the settlor.
Chapter
7. Charity: trust creation and public policy II
This chapter explores how the creation of trusts is influenced by special considerations of public policy, focusing on charity that is beneficial to the public as opposed to illegality. Charity will render a purpose trust valid that the law of trusts would otherwise consider to be void. In contrast, illegality will sometimes render an interest or transaction void or unenforceable that the law of trusts and gifts would generally consider to be valid. After considering the creation of charitable trusts, the chapter also discusses charitable purposes and the public benefit as well as the administration of charitable trusts, before concluding by analysing their variation in accordance with the ‘cy-près’ doctrine.
Chapter
6. Public policy limitations on the formation of trusts
Without assuming prior legal knowledge, books in the Directions series introduce and guide readers through key points of law and legal debate. Questions, diagrams and exercises help readers to engage fully with each subject and check their understanding as they progress. If a person sets up a trust to protect himself from creditors in case of insolvency, the trust will be void. Public policy does not permit private trusts to defeat public interests. In addition to a trust prejudicing one’s creditors, other examples of trusts that are void on grounds of public policy are trusts that promote racial or sexual prejudice, trusts which tie up wealth for too long, trusts that restrain marriage and ‘sham’ trusts. This chapter, which focuses on public policy limitations on the formation of trusts, first outlines the rules against perpetuities, the rule against remoteness of vesting, the rule against inalienability of capital and the rules against perpetuity and charities. It then considers private trusts, a breach of the rules against perpetuity and excessive accumulation of income, situations in which a trust designed to shield assets from creditors will and will not be void, the Perpetuities and Accumulations Act 1964, proposals for reform of the rules against perpetuities and gifts subject to conditions.
Chapter
6. Formality, perpetuity, and illegality: trust creation and public policy I
Trust property apparently belongs to the person who is not the true owner despite having all the forms and powers of ownership. Thus, a trust creates an illusion of ownership that may prejudice trade creditors when the trustee becomes insolvent and deceive the state’s tax collection agencies. However, there are a number of safeguards designed to prevent the undesirable creation and operation of trusts. For example, the disposition of equitable interests under trusts must be made in writing and the creation of trusts of land must be evidenced in writing. This chapter discusses the ways in which the creation of trusts is influenced by special considerations of public policy, focusing on formality, perpetuity, and illegality. It also considers rules against perpetuities—the rule against remoteness of vesting, the rule against inalienability of capital, and the rule against accumulation of income—and finally, looks at the Perpetuities and Accumulations Act 2009.
Chapter
6. Formality, perpetuity, and illegality: trust creation and public policy I
Trust property apparently belongs to the person who is not the true owner despite having all the forms and powers of ownership. Thus, a trust creates an illusion of ownership that may prejudice trade creditors when the trustee becomes insolvent and deceive the state’s tax collection agencies. However, there are a number of safeguards designed to prevent the undesirable creation and operation of trusts. For example, the disposition of equitable interests under trusts must be made in writing and the creation of trusts of land must be evidenced in writing. This chapter discusses the ways in which the creation of trusts is influenced by special considerations of public policy, focusing on formality, perpetuity, and illegality. It also considers rules against perpetuities—the rule against remoteness of vesting, the rule against inalienability of capital, and the rule against accumulation of income—and finally, looks at the Perpetuities and Accumulations Act 2009.
