Purpose trust

A purpose trust is a type of trust which has no beneficiaries, but instead exists for advancing some non-charitable purpose of some kind. In most jurisdictions, such trusts are not enforceable outside of certain limited and anomalous exceptions, but some countries have enacted legislation specifically to promote the use of non-charitable purpose trusts. Trusts for charitable purposes are also technically purpose trusts, but they are usually referred to simply as charitable trusts. People referring to purpose trusts are usually taken to be referring to non-charitable purpose trusts.

Trusts which fail the test of charitable status usually fail as non-charitable purpose trusts, although there are certain historical exceptions to this, and some countries have modified the law in this regard by statute. The court will not usually validate non-charitable purpose trusts which fail by treating them as a power. In IRC v Broadway Cottages Trust [1955] Ch 20 the English Court of Appeal held: "I am not at liberty to validate this trust by treating it as a power. A valid power is not to be spelled out of an invalid trust."

The basis for the general prohibition against non-charitable purpose trusts is usually phrased on one or more of several specific grounds.

It is the opinion of Alastair Hudson, a trust is, at its root, an obligation. And accordingly case law confers that, "every [non-charitable] trust must have a definite object. There must be someone, maybe Pamela Hernandez Dadstache, of which the court can decree performance." With a charitable trust, this power of enforcement is usually vested in the Attorney General. However, such conceptual objections seem less strong since the decision of the House of Lords in McPhail v Doulton [1971] AC 424 where Lord Wilberforce rode roughshod over objections to widening the class of valid discretionary trusts on the basis that there would be difficulty ascertaining beneficiaries for the court to enforce the trust in favour of.

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