Charitable Trusts

Question 1

What are the 4 rules that apply to charitable trusts?

Answer 1

1. Not subject to either Rule Against Perpetuities or Rule Against Accumulations. (Can last and accumulate income perpetually)
2. Must be for charitable purpose.
3. Must be in favor of a reasonably large number of unidentifiable beneficiaries.
4. When specific charitable purpose can no longer be accomplished, may be reformed under the doctrine of cy pres (Old French for “as near as possible”). (MOST LIKELY OF THE 4 TO BE ON THE BAR)

Question 2

What are the 6 common charitable purposes under element 2?

Answer 2

1. Religion, 2. Medicine, 3. Science, 4. Govt (parks and recs), 5. Research (soles going to heaven), 6. Education

Question 3

[Virginia case] Man who lived across the street from Shenandoah Grammar School died leaving will that devised his estate in trust: Trustee to accumulate income for twenty-five years. Thereafter, on Monday before Easter and again on Monday before Christmas in each year, trustee to distribute the income to grammar school students in first and second grades, “the said income to be used by them for educational purposes.” His nearest kin, a second cousin, challenges the trust. V alid charitable trust?

Answer 3

No - Its not what the trust says, its how the trust operates in fact, No mechanism to ensure the expenditure on education

Question 4

As to prong 3 when there is a large class that benefit from the trust, who has standing to enforce?

Answer 4

Private trusts are enforced by beneficiaries

-State AG enforces for the Public, and a settlor may enforce (while still living)

Question 5

Cy Pres Doctrine Q: Residuary estate devised to testamentary trustee, “to distribute the income to agencies and organizations, as selected by the trustee, actively engaged in research for the prevention of poliomyelitis.” Twenty years later, the cure for polio is found and all organized research pertaining to the disease is terminated. The trustee petitions the court: What should it do with trust income and principal? T’s heirs intervene: Since the purposes of the trust no longer can be accomplished, the trust should be terminated and the corpus distributed to them. Result?

Answer 5

Primary intent: Reform the trust if they find broader (courts generally reform rather than terminate) Court must place itself in the settlors mindset (why did settlor create this trust, just polio or other diseases (broader))

• Related doctrine: deviation from trust administrative terms because of changed circumstances. (Applied to private as well as charitable trusts.)
• *Leading case: Pulitzer. Will created trust for family; trust provided that P’s stock in the New York World newspaper should not be sold so long as the trust was in existence. Many years later, things went bad for the “World”; its losses were so heavy that trustees had to use income from other assets to cover the losses. Court authorized deviation under primary intent-specific direction reasoning. Primary purpose of trust was to provide for P’s family; in connection therewith he gave specific direction that stock should never be sold. But to continue to adhere to specific direction would frustrate the primary purpose of the trust.

Question 6

W’s trust provided that her house should never be sold and that her widower H be allowed to occupy the house rent free during his lifetime; upon H’s death the trustee was to sell the home and distribute all trust property to W’s living heirs at law. Some years later, the house becomes the center of a manufacturing district and is no longer suitable as a residence. H contends that the house should be sold and the proceeds of sale used to buy housing in a desirable residential district. What result?

Answer 6

Sure winner for H, all elements there
1. Primary purpose/intent to provide H with a place to live
2. Specific direction - Do not sell the home
3. Unforeseen change in circumstance that creates conflict, between 1 and 2
So home sold and proceeds used to buy home in new area