Cy Pres doctrine allows charitable trusts to adapt and continue

On Behalf of | Dec 11, 2017 | Firm News, trusts

When people in North Carolina choose to form a charitable trust, they might want them to serve their purpose in perpetuity. Unlike other trusts, a charitable trust has the option of continuing its mission indefinitely. This open-ended feature on some charitable trusts, however, could result in the trust outliving the existence of its beneficiary. An educational institution closing its doors represents an example of a beneficiary ceasing to exist. In this situation, the Cy Pres doctrine sanctions the alteration of the trust so that it can continue.

Only a court can update the terms of a charitable trust under these circumstances. Otherwise, the trust simply fails. The Cy Pres doctrine, however, grants courts the ability to modify the original purpose of the trust and redirect distributions to a new beneficiary. Because charitable trusts specifically define the purpose of their charitable giving, courts would select a new purpose similar to the original intent of the trust.

Circumstances other than the dissolution of an institution that had been receiving charitable funds could prompt a court to make changes. As time goes by, the purpose of a charitable trust might become unlawful, wasteful or impractical. Courts may correct these problems by modifying terms to reflect modern needs or standards. Additionally, courts have the option of ending the trust and distributing its assets in a manner consistent with the original charitable purpose.

A person charged with managing a trust might need the assistance of an attorney if changing circumstances interfere with the purpose of a charitable trust. An attorney could review the original terms and research legal options for resolving problems with trusts. The filing of court paperwork to achieve trust alterations could be managed by an attorney.