Since charitable trusts are in favour of charity, they are treated differently to ordinary trusts. The definition of charity is set out in the preamble to the Statute of Charitable Uses 1601, and is still used in the modern era as its definition.
A charitable trust is an express trust and like any other express trusts there must be:
- A specific intention for the trust (Certainty of intention)
- A property that is the subject of the trust (Certainty of subject matter)
- A charitable purpose (Certainty of objects)
Any trust may be considered to have a charitable purpose if it is a trust for:
- the relief of poverty,
- the advancement of education,
- the advancement of religion
- other purposes beneficial to the community that do not fall under any of these categories.
In relation to the last category, a public benefit alone does not constitute a charity. Two essential elements have to be satisfied in order for the purpose of the trust to be charitable: "Benefit to the public or to a section thereof; and "Inclusion within the spirit and intendment of the preamble to the Statute of Charitable Uses 1601.
A charitable trust can be created through living people (inter vivos) or by a will. This trust may be created by a declaration of trust or through the transfer of property. At common law, a charitable trust can be of indefinite duration and is preserved by the Perpetuities Act 1984 (NSW).
The public nature of a charitable trust is reflected by the administration of the trust by the Crown. The Attorney General, on behalf of the crown, has the duty to enforce the proper performance of charitable trusts and execute any trust where the trustees fail to do so.