How the Cy Pres doctrine affects charitable trusts

On Behalf of | May 21, 2018 | Trusts |

Some people in Georgia who are creating an estate plan might wonder how a charitable trust differs from other types of trusts. For example, unlike a regular trust, a charitable trust does not have to name a beneficiary since the general public is supposed to benefit from the trust.

There is a rule against a trust existing in perpetuity, but this does not apply to charitable trusts. The idea behind the rule is to prevent the indefinite restriction of the use of a piece of property, but there is an exception for charitable uses.

Finally, a charitable trust can be altered by a court rather than being allowed to fail. This is known as the “Cy Pres” doctrine. This alteration may be necessary because a charitable trust often has a narrow and specific purpose. For example, a trust might be created to fund an educational organization, and that organization might cease to exist. Under the Cy Pres doctrine, the court can direct funding to another educational organization. This doctrine is recognized by most courts. These are the major ways a charitable trust differs from a regular trust although there are other differences such as how they are treated for tax purposes and how they should be drafted.

People who are interested in trusts might want to talk to an attorney about how they can be useful. A trust is not just about protecting wealth or avoiding estate tax. In addition to providing for charity, they can be used to manage assets for beneficiaries who might be irresponsible with the inheritance or to help relatives who have special needs. Trusts must be funded after they are created, and trustees must be chosen who are knowledgeable about finances. In some cases, professionals may be a better choice than loved ones.

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