Trust deed for the establishment and maintenance of an economics library

Trust deed for the establishment and maintenance of an economics library

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This precedent is a trust deed for the establishment and maintenance of an economics library.

As the trustee legislation now confers upon trustees a general power to invest in any form of investment, and to vary investments from time to time, the words "of the investments for the time being permitted by law for the investment of trust funds with power for the trustees or trustee at their discretion to vary any investment for any other of a like nature" are strictly speaking, superfluous. The issue for settlors (and therefore drafters of trust deeds) is now, rather than broadening the scope of investment powers, to consider whether to limit the scope of this power. If a limit to certain forms of investment, or a prohibition on certain forms of investment, is deemed appropriate, any limit must be expressly and clearly stated in the trust deed.

Charity structures

There are four main options available for structuring a vehicle to achieve charitable purposes. They are:

·                trust deed;

·                incorporation under the Corporations Act 2001 (Cth);

·                incorporation under associations incorporation legislation; and

·                application for a Royal Charter.

Charitable purposes

Charitable purposes at general law include:

·                the relief of poverty, age and impotence;

·                the advancement of education;

·                the advancement of religion; and

·                other purposes beneficial to the community.

Under the Charities Act 2013 (Cth) section 12, charitable purpose is defined as:

·                the purpose of advancing health;

·                the purpose of advancing education;

·                the purpose of advancing social or public welfare;

·                the purpose of advancing religion;

·                the purpose of advancing culture;

·                the purpose of promoting reconciliation, mutual respect and tolerance between groups of individuals that are in Australia;

·                the purpose of promoting or protecting human rights;

·                the purpose of advancing the security or safety of Australia or the Australian public;

·                the purpose of preventing or relieving the suffering of animals;

·                the purpose of advancing the natural environment;

·                any other purpose beneficial to the general public that may reasonably be regarded as analogous to, or within the spirit of, any of the purposes mentioned in the preceding paragraphs;

·                the purpose of promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a state, a territory or another country, if:

o      in the case of promoting a change, the change is in furtherance or in aid of one or more of the purposes mentioned above; or

o      in the case of opposing a change, the change is in opposition to, or in hindrance of, one or more of the purposes mentioned above.

Trust deed

This is the traditional method of setting up a charitable trust, and is often done through appropriate clauses in a will. It has the advantage of low operational cost and privacy, and concentrates control in the hands of the trustees, since only death, resignation or court order can remove them. A drawback is that trustees are personally liable for any loss suffered by the trust (although this can be mollified by appropriate provision in the trust instrument, which can exclude liability for non-fraudulent breaches of trust or losses). There may be some difficulty in establishing that the charity is an "institution" for the purposes of statutory privileges.

Considerations to be made when establishing a charitable trust include:

·                In drafting a deed for a charitable trust, the prime consideration should be the objects clause. Although in most jurisdictions there exists saving legislation to validate certain trusts that are not exclusively charitable, it is clearly preferable to draft the objects so that they are wholly charitable. This avoids the need for an application to the court, the result of which may be uncertain, and the cost of which must be borne by the trust funds.

·                Particular care should be taken in appointing as trustees persons qualified not only by way of expertise in managing property, but also, given the wide discretion often conferred on charity trustees and the fact that no individual beneficiary can enforce the trust, by way of character. This explains why it is not uncommon for trustee companies to act as sole trustees or co-trustees in the administration of a charitable trust. It also explains why, coupled with the issues of independence and conflict of interest, it may not be ideal for a trustee of a charitable trust to be one of a class of persons who might benefit from the trust. Having said that, however, there is no prohibition on such an appointment because the trustee must, as a fiduciary, subordinate his or her own interests to those of the charity, and is, in any case, always subject to the control of the Attorney-General. There may, in some circumstances, actually be good reason to appoint such a person (though not as sole trustee), in order to inform the other trustees as to the needs of the class of the persons who may benefit from the trust. Where a charitable trust is established for the benefit of a religious denomination, its trustees should ideally also be members of that denomination.

·                There is no restriction on the number of charity trustees who may be appointed, whether at the creation of the trust or under an express power of appointment contained in the trust instrument. The statutory power to appoint cannot, however, be exercised to increase the number of trustees beyond four in New South Wales, Western Australia, and the Australian Capital Territory. An appointment of more than one trustee enhances the internal accountability if the trust and reduces the likelihood that it will be fraudulently or incompetently administered.

·                Charitable trustees normally expect no remuneration, and are entitled to only if authorised by, and according to the terms of, the trust deed. The trustee legislation in most jurisdictions provides that the court may authorise any person to charge remuneration for services as trustee as the court thinks fit. In any case, the court has an inherent jurisdiction to allow trustees to charge for their services where appropriate. Even trust deeds that expressly declare that trustees are to receive no remuneration usually provide for the payment of reasonable out-of-pocket expenses incurred by them on trust business. Even absent such a provision, the matter is covered by the trustee's general law and statutory right to indemnity out of the trust fund for expenses properly incurred in the conduct of the trust.

·                In the past, it was unwise to rely on trustees' statutory powers of investment – stated in the form of a list containing conservative investment alternatives – that proved inadequate to protect the value of funds in times of inflation. Now that the trustee legislation in all jurisdictions confers on trustees the power, unless expressly prohibited by the trust instrument, to invest trust funds in any form of investment, and to vary such an investment at any time, the need for broad investment clauses in charity trust instruments is obviated. Now settlors and drafters must instead consider whether to limit the scope of investment avenues to which the trustees have resort.