Trust

The purpose of a CHARITABLE TRUST is to accomplish a substantial social benefit for some portion of the public. The law favors charitable trusts by according them certain privileges, such as an advantageous tax status. Before a court will enforce a charitable trust, however, it must examine the alleged charity and evaluate its social benefits. The court cannot rely on the settlor's view that the trust is charitable.

To be valid, a charitable trust must meet certain requirements. The settlor must have the intent to create a charitable trust, there must be a trustee to administer the trust, which consists of some trust property, and the charitable purpose must be expressly designated. The beneficiary must be a definite segment of the community composed of indefinite persons. Selected persons within the class must actually receive the benefit. The requirements of intention, trustee, and res in a charitable trust are the same as those in a private trust.

Charitable Purpose A charitable purpose is one that benefits, improves, or uplifts humankind mentally, morally, or physically. The relief of poverty, the improvement of government, and the advancement of religion, education, or health are some examples of charitable purposes.

Beneficiaries The class to be benefited in a charitable trust must be a definite segment of the public. It must be large enough so that the community in general is affected and has an interest in the enforcement of the trust, yet it must not include the entire human race. Within the class, however, the specific persons to benefit must be indefinite. A trust "for the benefit of orphans of veterans of the 1991 Gulf War" is charitable because the class or category of beneficiaries is definite. The indefinite persons within the class are the individuals ultimately selected by the trustee to receive the provided benefit.

A trust for designated persons or a trust for profit cannot be a charitable trust. A trust to "erect and maintain a hospital" might be charitable even though the hospital charges the patients who are served, provided that any profits are used solely to continue the charitable services of the hospital.

As a general rule, a charitable trust may last forever, unlike a private trust. In a private trust, the designated beneficiary is the proper person to enforce the trust. In a charitable trust, the state attorney general, who represents the public interest, is the proper person to enforce the trust.

Cy Pres Doctrine The doctrine of CY PRES, taken from the phrase cy pres comme possible (French for "as near as possible"), refers to the power of a court to change administrative provisions in a charitable trust when the settlor's directions hinder the trustee in accomplishing the trust purpose. A court also has the power under the cy pres doctrine to order the trust funds to be applied to a charitable purpose other than the one named by the settlor. This will occur if it has become impossible, impractical, or inexpedient to accomplish the settlor's charitable purpose. Because a charitable trust can last forever, many purposes become obsolete because of changing economic, social, political, or other conditions. For example, a trust created in 1930 to combat smallpox would be of little practical value today because medical advances have virtually eliminated the disease. When the cy pres doctrine is applied, the court reasons that the settlor would have wanted her general charitable purposes implemented despite the changing conditions.

The cy pres doctrine can be applied only by a court, never by the trustees of the trust, who must execute the terms of the trust. Trustees can apply to the court, however, for cy pres instructions when they believe that the trust arrangements warrant it.