For a trust to be considered charitable, it must have a stated charitable purpose and it must exist for the benefit of the community at large or for a class of persons the membership in which varies. For public-policy reasons, charitable trusts are usually construed quite liberally by the courts.
Neither the settlor nor a potential beneficiary has standing to challenge a charitable trust. Only the state attorney general possesses such a right.
Purposes considered to be charitable include:
The relief of poverty;
The advancement of education or religion;
The promotion of good health;
Governmental or municipal purposes; and
Other purposes benefitting the community at large or a particular segment of the community.
While a certain political party is not deemed to be a charitable beneficiary, those seeking to advance a political movement may be charitable beneficiaries. A determination as to whether or not a beneficiary is charitable involves an inquiry into the predominant purpose of the organization and the determination of whether or not the organization is aimed at making a profit.
The rules applying to charitable trusts are not applicable to those with both charitable and noncharitable purposes, unless two separate and distinct trust shares are capable of being administered, in which case the rules are applicable to the charitable share.
A charitable purpose can be found even if the settlor created the trust out of noncharitable motives.
Cy Pres Doctrine
In an effort to carry out the testator’s intent, under the cy pres doctrine, a court may modify a charitable trust to seek an alternative charitable purpose if the original charitable purpose becomes illegal, impracticable, or impossible to perform. The court must determine the settlor’s primary purpose and select a new purpose “as near as possible” to the original purpose.
The settlor’s intent controls, so if it appears that the settlor would not have wished that an alternative charitable purpose be selected, the trust property may instead be subject to a resulting trust for the benefit of the settlor’s estate.
It is beneficial to retain experienced and professional attorneys to assist with the creation of your charitable trust. Please call Aziz Legal by phone at (408) 203-4627 or email us at firstname.lastname@example.org.
This article is merely informational and is not intended to be used as legal advice. Use of any information from this article is for general information only and does not represent personal legal or tax advice, either express or implied. Readers are encouraged to consult Aziz Legal, or another attorney, for any specific legal matters.