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Understanding cy-pres doctrine and how it applies to trusts

Many people create charitable trusts as part of their estate planning portfolios. Generally, a charitable trust is an allocation of assets that provides funding for certain types of charitable causes. For example, a person with a lifetime interest in classical music might designate a portion of their estate to provide perpetual funding for the benefit of a local symphony hall. Another example might be an avid birdwatcher setting aside funds to preserve a particular type of endangered bird.

In both of those examples the individuals creating those trusts are known as settlors. Alternatively, the organizations who receive those funds are known as beneficiaries. Sometimes trusts run into difficulty when situations arise that frustrate the original intentions of the settlor or otherwise makes it impossible to carry out the settlor's wishes in accordance with a trust. Using the above-mentioned examples, imagine if a symphony hall that a settlor had designated to receive funding from one's trust burned down. Or consider what might happen to a trust formed to safeguard an endangered bird if that creature should later become extinct.

Fortunately, a legal doctrine exists to help remedy these types of situations. Cy-pres is a term used when a court can interpret settlors' intentions for their trusts. Usually, courts will do this in an attempt to apply a settlor's funds in a way "as nearly like" the settlor's original purpose. For example, a court may believe that an opera lover might have wanted to rebuild a destroyed symphony hall. Similarly, a court may determine that funds once earmarked to save endangered birds might be diverted to preserve the memory of an extinct bird through the creation of a bird museum.

It's important for you to know that sometimes individuals may attempt to use the cy-pres doctrine in a manner in which the original settlor might have disagreed with. In those cases a trustee can challenge the merit of diverting those assets. In some cases where cy-pres doctrine is not practical a court might revert those funds to the settlor's estate where it would be subject to the settlor's successors in interests. This is another reason why consulting with a New York estate planning attorney may be wise. An attorney can help you defend against or support cy-pres actions in accordance with your opinion as trustee.

Source: National Paralegal College, "Modification of Charitable Trusts—The Cy Pres Doctrine," accessed June 29, 2015

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Weinstein & Randisi
290 Linden Oaks, Ste. 200
Rochester, NY 14625

Toll Free: 800-768-1780
Phone: 585-310-1578
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