Charitable and Honorary Trusts

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11 Terms

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Unique Rules For Charitable Trusts

(1) requirement of indefinite beneficiaries; (2) ability to be perpetual; and (3) application of cy pres

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Charitable Purpose

The purpose of the trust must be to benefit the public. This can include: (1) relief of poverty; (2) advancement of education, science, and art; (3) advancement of religion; (4) promotion of health; and (5) accomplishment of government purposes, such as parks, museums, or playgrounds

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Requisite Altruism

The class to benefit may be limited, but not so narrowly as to only benefit a few people the settlor wishes to aid personally. However, just because some family members might be benefited does not keep the trust from being charitable

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Indefinite Beneficiaries

A charitable trust must benefit the public generally or an benefit an indefinite class of members of the public

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Cy Pres

When a charitable purpose selected by the settlor is accomplished or becomes impracticable, the court may select an alternative under cy pres. The court must find a general charitable intent on the part of the settlor and ascertain the settlor’s primary purpose. This applies to charitable gifts as well as charitable trusts

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Cy Pres: General Charitable Intent

The settlor must not have intended to limit their gift to a particular charity regardless of changing circumstances. If the court finds only a specific intent, the trust fails and passes as a resulting trust to the settlor’s successors in title. Under the UTC, general charitable intent is presumed

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Charitable Trusts and RAP

Charitable trusts are not bound by RAP and may be perpetual. RAP does apply to shifts between private and charitable uses

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Enforcement of Charitable Trusts

In many states, the settlor and beneficiaries have no standing to enforce the terms and the state attorney general must bring suit. Under the UTC the settlor and qualified beneficiaries (current beneficiaries and first-line remaindermen) have standing to enforce the trust

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Honorary Trust/Purpose Trust

A trust not for a charitable purpose that has no private beneficiaries. They are commonly established for the benefit of pets and for the maintenance of burial places. Courts uphold honor trusts as long as the named trustee is wiling to perform their duties. The UTC also recognizes trusts for the care of an animal alive during the settlor’s lifetime that terminated when the animal dies.

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Honorary Trusts and RAP

Many jurisdictions will void an honorary trust on the basis of RAP if its duration may be more than a human life in being plus 21 years. Under the UTC, honorary trusts are enforceable up to 21 years by someone named in the trust instrument or appointed by the court

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Honorary Trusts Constructional Outs

Some courts use constructional outs to save an honorary trust. This can involve holding that: (1) the trust is personal to the named trustee; and/or (2) because the fund will be exhausted within the perpetuities period, it cannot last beyond the period and does not violate RAP