Charitable and Honorary Trusts Flashcards
*Charitable Trusts:
Purposes
Must confer a substantial social benefit
E.g. “to be used for charitable purposes” and “to support the performing arts” was sufficient even though no specific charity named
Indefinite Beneficiaries
Must benefit more than just a small number of identifiable individuals (e.g. charitable class can’t be too narrowly defined)
Charitable Trusts:
Rules Against Perpetuities
RAP does not apply:
Unless shifting trust from charitable to private (or vice versa)
If violates RAP, Texas statute will reform it so as to carry out settlor’s general intent as far as possible within RAP
*Charitable Trusts:
Cy Pres
if original charitable purpose is no longer possible (e.g. charity is gone) or there was a general charitable intent, court will direct trust funds be applied to another charitable purpose that is similar to the first one.
Must show that specific charitable purpose is no longer practicable and there was a general charitable intent..
*Charitable Trusts:
Trustee’s authority to name new charitable beneficiary
If specified charity beneficiary fails to exist or remain a charity and the trust does not provide for a successor, trustee is authorized (without court approval, but must give notice to AG) to designate a replacement that has same or similar charitable purpose as the failed beneficiary.
*Charitable Trusts:
Judicial Proceedings Involving Charitable Trusts
AG and *settlor (not potential beneficiary) only have standing to bring action enforcing charitable trust.
Notice of any judicial proceeding must be sent to AG office
Any action involving a charitable trust, certified copy of the petition must be sent to AG so he can decide whether to appear.
Failure to give notice makes judgment voidable by AG (AG has final word and can enjoin)
Honorary Trusts
when a noncharitable trust is created with an object as the beneficiary (e.g. trust for maintenance of an estate) instead of ascertainable persons, it is not enforceable, but the “trustee” is permitted to perform.
If the trustee does not perform the trust, it turns into a resulting trust in favor of the grantor’s estate.
- not actually a trust because no proper beneficiary
Honorary Trusts:
Exception: Trust for Care of Animal
Trust for animals alive during settlor’s lifetime is valid, but trust terminates on death of animal (or last surviving animal).
Outright bequest to animal is void since animals cannot own property
Trust is enforceable by person named in trust or appointed by court
Individuals named in instrument creating trust to be used as measuring lives for RAP
Resulting Trust (* trust code does not apply)
situation: if trust fails or does not exhaust all property (or purchase money resulting trust)
based on implied or presumed intent of settlor rather than on any express intent
Trustees only duty is to hold and convey property in accordance with demands of party deemed to be beneficiary.
*Resulting Trust:
Purchase Money Resulting Trust (*Trust code does not apply)
When one party pays purchase price of property and title is taken in unrelated party’s name, presume that it was PMRT and not a gift.
If person who took the title was family, then the presumption is that it was a gift or loan.
Presumption can be rebutted by extrinsic evidence that it was a gift (e.g. if family) or loan of purchase price.
- so if settlor pays for land and puts it in trustee’s name, there is a strong presumption that it is a purchase money resulting trust and not that trustee owns it as a gift. So trustee would have to transfer it to settlor on demand.
Constructive Trusts (*trust code does not apply) :
Wrongful Conduct and Unjust Enrichment
Not a trust, but an equitable remedy whose object is to disgorge unjust enrichment
Two elements: wrongful conduct and unjust enrichment
Constructive Trusts:
Oral Trusts of Real Property
Situation: grantor gives land to person who thinks is trustee but since SOF is not met, “trustee” is just grantor.
if trust to land is prevented by statute of frauds, constructive trust may be imposed in favor of intended beneficiary if the grantee’s promise is proved by clear and convincing evidence and there was
(i) fraud in the inducement: grantee agreed to hold in trust but had no intention of carrying it out;
(ii) duress or undue influence;
(iii) a confidential relationship between grantor and grantee
Constructive Trust
Secret Trust
will leaves gift to a person on the understanding that it will be held in a trust for another person (intended beneficiary) not named in the will
Extrinsic evidence allowed not to enforce the oral trust, but to impose a constructive trust on the basis of unjust enrichment
Proof by clear and convincing evidence
Constructive Trust
Semi-Secret Trust
will leaves gift to a person on the understanding that it will be held in a trust for another person (intended beneficiary) and the will specifies it should go in trust, but does not name the trust or the intended beneficiary
Trust fails for want of identifiable beneficiaries and no constructive trust arises.
Types of Resulting Trusts
- purchase money resulting trusts: see other slide
- resulting trust upon failure of express trust: express trust fails and no indication as to what to do with property
- resulting trust by reversion: trust purpose is completely satisfied and some trust property remains or the trust makes an incomplete disposition of assets of the trust
- if the trustee of a charitable trust is not enforcing the trust according to its terms, what can the settlor do?
Settlor (but not beneficiary) has right and standing to enforce the trust for the purpose it was created.
Can:
- File injunction
- try to remove trustee
remember: in non-charitable trusts, either settlor or beneficiary had standing
