What do you do when a charitable trust outlives it’s stated purpose or terms? In some cases, it may be necessary to dissolve the trust.
In other cases, the court can use the legal doctrine known as “cy pres” to fulfill the intent of the trust, even if it is no longer possible to fulfill the exact terms in the wording of the trust.
This allows the trust to continue in its charitable purpose, working as closely in alignment with the original benefactor’s intentions and wishes.
For example, imagine that a highly-educated woman of wealth dies, leaving behind an estate that includes a charitable trust. The charitable trust provides $250,000 per year in funding specifically for the purpose of providing new books for a small library in her town. The trust pays out for decades with no problems.
During that time, however, the town grows up, and the library eventually needs to expand. It changes location so that it is more central to the city. Because the trust specifically listed the address of the old library, the court would have to examine the trust and determine whether or not the location of the library, for whatever reason, was an important part of the trust.
If it was important to the woman’s intent, the trust would have to be dissolved. If it wasn’t, the court could determine that the true intent of the trust was to fund the public library, regardless of its exact location. Using the cy pres doctrine, the court can remove the location requirement from the trust and allow the trust to continue in its general intended purpose.
In real life, however, the situation is seldom as simple or so easily resolved. It isn’t unusual, for example, for their to be conflict surrounding the benefactor’s true intention, especially if relatives would like to see the trust dissolved and the money paid out to the benefactor’s heirs.
For example, maybe the woman’s heirs insist that she only left the funding to the local library because that was where she met her husband. She really intended the money to keep the library open at that location. That information would change the purpose of the trust, and the outcome of the cy pres hearing.
It’s wise to seek professional advice regarding any question involving trusts because of complex issues like these.
Source: FindLaw, “Cy Pres,” accessed Feb. 2, 2018