A trust can be a very beneficial estate planning tool for persons wishing to make charitable contributions. However, there are some important aspects to consider when drafting and administering a charitable gift within a trust.
Institution or Specific Purpose No Longer in Existence
Like any other beneficiary, it is important to plan for possible alternates if the named charitable beneficiary is no longer in existence. Also, because a particular purpose may be limited and no longer in existence within a specific institution, it may be wise to name the institution itself as a contingent beneficiary, as some individuals limit a specific division within an organization. If that division is no longer in operation, the gift may be forced to lapse. The drafter can provide for a similar purpose, or something related, if the first named purpose or beneficiary is no longer in existence. For example, if a client wishes to provide for a specific animal shelter and that animal shelter is no longer in existence, having Humane Society International as a contingent beneficiary may still allow for the same or similar goal to be achieved.
A client may also provide for a limited power of appointment, wherein they provide a list of charitable organizations and the trustee may choose from the provided list. The power can even be so broad to allow the trustee to remove one charitable beneficiary and replace it with another. This power of appointment will protect the gift from lapsing due to nonexistence.
Administration of Charitable Trusts
Notification
All beneficiaries must be notified of the trust when being administered. Therefore, the charitable organization must receive notification including the relevant trust provisions.
Attorney General Supervision
Any trust where more than five percent (5%) of the trust assets are to be gifted for a charitable purpose, is considered a Charitable Trust for purposes of the Supervision of Trustees for Charitable Purposes Act (the “Act”). If a trust falls under the Act, the trustee of the trust must register the trust with the attorney general. A copy of the trust must be provided to the attorney general’s office as well. If the charitable organization is a contingent beneficiary, registration need not be done until the charitable organization becomes an income beneficiary.
Strobl Sharp PLLC is a team of experienced and trusted lawyers that can advise on all estate planning and charitable giving matters. For more information, visit Strobl Sharp online at www.stroblandsharp.com or on LinkedIn.