Equity and Trusts: England and Wales - Essay Example

EQUITY AND TRUSTS In law, the concepts of equity and trusts are closely related and areoften applied together in similar contexts. The principles of equity contributed greatly to the development of the principles of Trust. Trust law is applied whenever a person has placed confidence and trust of the management of his or her affairs to another person. Such relationships are governed by the force of law of equity and trust law provides mechanism for a number of pension funds, charities, and family relationships among other situations (Hudson, 2005, p. 19). This discussion will focus on the aspects of equity and trust within the context of England and Wales. Part 1 The wishes contained in Vera’s will upon her death amounted to issues relating to equity and trusts law. Actually, it relates to charitable trusts. Under the Charitable Act 2006, Vera’s wish as contained in her will is considered as charitable gifts. These gifts can be defined as gifts that are given by either the legal or physical person to benefit a particular cause, often known as charitable purposes. Most charitable givers, like Vera, mostly employ the services of executors and trustees to execute their charitable cause. Executors and trustees are the people who have fiduciary duty of property administration, a duty which they should discharge in consistence with testator’s wishes (as expressed in his or her will) (Dollimore, 2007, p. 56). The law requires that the validity of the charitable gifts be ascertained. Therefore, executors and trustees should be conversant with the criterion of determining such validity. Determination of validity of the provisions contained in a testator’s will is crucial in ensuring that such wishes meet the legal threshold. It is against this background that it is important to determine the validity of Vera’s wishes. In her will, Vera gave all her property to her executors and trustees upon trust to sell the same and to hold the proceeds of sale as a trust fund upon trust in two halves. The first half was aimed at promoting research into the theory that the pyramids were built by aliens from another world. According to Edwards and Nigel (2007, p. 71), under the Charities Act 2006, this is considered as a valid cause because its main purpose is to promote education. Education as a charitable purpose is founded on Charitable Uses Act 1601 and has been further expanded under the Charities Act 2006. Over the years, the common law has recognized education as a charitable purpose that covers a wide area. The education category includes education of the young and research. Research will be considered under the category of education, as long as the topic be researched upon is useful to the society and that it makes some requirement that the research findings will be disseminated and made available to others. In her will, Vera, wanted the executors to hold the proceeds of sale of her property as trust fund upon trust, where half of the proceeds should be used to promote research into the theory that the pyramids were built by aliens from another world. Such a will is valid as it falls under the education category as stipulated under the Charitable Uses Act 1601 and expounded under Charities Act 2006 (Volkmer, 2010, p.39). Her wish bears similarities to the case of Re Hopkins; in this case, a gift was granted to Francis Bacon so as to prove that the plays of William Shakespeare were written by Francis Bacon. It was held that such a gift was valid because its research findings would have great value not only to literature but also to history. Education as a charitable gift has been given a broader definition that goes beyond the basic education elements such as teaching. So, for research to be considered under the category of education, it has to be of considerable educational value and must be directed towards passing over educational material. In McGovern v Attorney General, Slade J further expanded the definition of education under charitable trusts (McDonald and Street, 2011, p. 50). Apart from the aforementioned criteria that are required to attain, the trust should benefit the public or a significant portion of the public. In the will, Vera wanted her executors and trustees to hold the other half of the proceeds of sale as a trust fund upon trust to care for cats and kittens and to assist in the work of organizations that are dedicated to preventing the use of such animals in the testing of cosmetics. The Charitable Uses Act 1601 describes trusts that are dedicated to animals as belonging to a sub- category for other purposes that benefit the community (Domen, 2009, p. 79). Such charities are afforded to animals because of the indirect benefit that man derives from the animals. As noted in the case of Re Grove- Grady, the trusts dedicated to animals, either for their care or preventing them from harm, should be beneficial to the public; the beneficiaries should not be isolated from the public. Another main purpose behind trust for animals is to ensure that they are safe from destruction and molestation by man. It is worth noting that even though the other categories of charities are considered to be more beneficial to the public, charity trust for animals pass test of “public benefit” because they sometimes have educational value, and at the same time they do not exclude the public, completely (Edwards and Nigel, 2007, p. 108). It is clear that Vera wanted animals to be protected against destruction and molestation by man, for instance through using them in the testing of cosmetics. Since Vera’s wish is considered legal under Charities Act 2006, Vera’s executors and trustees should go ahead and ensure that the second half of the proceeds is used for the purposes that Vera intended. Part 2 “In truth the question of whether or not the potential beneficiaries of a trust can fairly be said to constitute a section of the public is a question of degree and cannot be by itself decisive of the question whether the trust is a charity.  Much must depend on the purpose of the trust…” Indeed, this assertion is very true because the legal framework covering trusts determines the validity of any charitable mostly on the basis of purpose rather than on the potential beneficiaries. The legal frameworks upon which charitable trusts are founded are seen to give more emphasis to the purposes of the trust rather than the beneficiaries. This is evident even in the initial Act governing trusts; the Charitable Uses Act 1601 was the first to define the purposes of charity and its importance. Subsequent ruling in IRC v Pemsel by Lord Macnaghten further emphasized on the importance of the purpose of the trust over the beneficiaries (Volkmer, 2010, p.40). However, it should be noted that this assertion does not imply that beneficiaries do not constitute a significant part in determining whether a trust is charitable or not. Instead, it implies that even though beneficiaries are significant in determining whether a trust is a charity, purpose of the trust is what gives the trust more validity. As a matter of fact, trust must be seen (by law) to be for public benefit; this means that the public benefit must always override any other interest even if it is that of the beneficiaries. As noted in several cases regarding the question of charity as trust, “purpose” of the charity is what guides the court to determine the validity of a trust as a charity (McDonald and Street, 2011, p. 81). Therefore, the testator’s executors and trustees should always be conversant with the criteria used in determining validity before executing the wishes of the grantor or testator. More importantly, it is worth noting that the question of trust on whether it is a charity or not vary from one category of charity (in the legal sense) to the other. In order to understand better this assertion and why it is legally true, it is vital to understand these two main terms: beneficiaries and the purpose. It is argued that, in most cases, the beneficiaries are the main reason for a grantor or testator’s trust. These are the people who the grantor or testator wishes they enjoy the benefits of his or her trust assets; for example, children, wives, sports organizations, schools, universities, and charitable organizations among others (Dollimore, 2007, p. 12). Trusts are irrevocable. This implies that the grantor gives up his the assets in order to gain assets protection, elimination of estate taxes but gains specific uncommon tax advantages. The logic behind the irrevocability of trusts is to ensure that the grantor does not have any degree of control because such will render the trust revocable. In regard to purpose, it is a known fact that trusts are established for a specific purpose, the purpose of which determines the trust’s basic provisions and the form that the trust shall take. Essentially, the purpose of a trust is to give an individual or group of individuals the benefit of specific property, as well as limiting how they can use the property. In the process, the trusts are believed to benefit the beneficiaries who are part of the entire society. Therefore, if the trust is being used well and for the intended purpose, then it is considered to achieve the purpose of “public benefit” (McDonald and Street, 2011, p. 47). It is no doubt that the English and Wales law covering charity gives emphasis to the fact trust is a charity mostly depending on the purpose of the trust. This is made evidently clear by the ruling in most relevant cases and in the Acts governing the same. Both the Charitable Uses Act 1601 and Charities Act 2006 have articulated “charitable purpose” as the core part of trust as Charity trust. As noted in Oppenheim v Tobacco Securities Trust, trust must be for “public benefit”. British American Tobacco had created a fund to benefit former employees as well as the children of employees. The former employees comprised the majority. In this case, the House of Lords noted that the size was not the problem, but argued the group that the British American Tobacco sought to benefit could not count as a section of the public as there was no common relationship between them. This case shows that, in truth the question of whether or not the potential beneficiaries of a trust cannot be decisive in determining whether a trust is a charity. This is because such a question is of degree as House of Lords showed that there was no common relationship (Edwards and Nigel, 2007, p. 95). Moreover, the Charities Act 2006 states that trust should be for an appropriate purpose. This explains the reason why Sir Raymond Evershed in Re Coulthurst said that the term “poverty” is subjective. In explaining this, he argued that poverty should not be treated as destitution but as a relief of some sort. For example, in the category of addressing poverty through charity, Charities Act 2006 states that charitable gift should not be limited to the poor only. Furthermore, the decision on the question of whether trust is charity is seen to depend most on the purpose of the trust as demonstrated in Dingle v Turner [1972] 1 AII ER 878 (McDonald and Street, 2011, p. 133). In this case, a charitable trust was set up to assist the employees of Dingle & Co who were considered poor. The beneficiaries in this case were linked by their single employer, so it can be said that there was a personal relationship. In the case, Lord Cross made a ruling that poverty do not require public benefit. He went ahead and noted that for trust to be considered as a charity it has to fall within the public benefit. This has to be determined by the purpose of the charity which must satisfy two aspects. The first aspect is the charitable gift of actual public benefit, and two, is the charitable gift of any benefit to the community or to a considerable section of the community? (Domen, 2009, p. 67). This ruling adds more credence to the assertion that even though the potential beneficiaries of a trust can be said to constitute a section of the public, they cannot absolutely decide the question of whether the trust is a charity. Instead, much of that determination depends on the purpose of the trust. Bibliography Dollimore, J, 2007, The Charities Act 2006: Part 1, Sweet & Maxwell Domen, B, 2009, “Rethinking the Social and Cultural Dimensions of Charitable Giving,” Consumption, Markets & Culture, Vol. 12, Issue 1, p. 65-84 Edwards, R and Nigel S, 2007, Trusts and Equity, Pearson Longman Hudson, A, 2005, Equity and Trusts, Routledge Cavendish. McDonald, I and Street, A, 2011, Equity & Trusts Concentrate: Law Revision and Study Guide, Oxford: Oxford University Press. Volkmer, R. R, 2010, “Issues regarding charitable gifts,” Estate Planning, 37(5), 39-40 Read More