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What happens to a charitable trust if the charity no longer exists?

On Behalf of | Apr 20, 2023 | Trusts |

Estate planning is an excellent tool for individuals to recalibrate their goals and values. Tools such as wills and trusts help people put their wishes into writing. Some people primarily think about the security of their family, while others align their wishes with causes close to their hearts, like breast cancer awareness or animal rights campaigns. This is why some grantors include charitable trusts in their estate plans.

But what if the charity organization in the trust is no longer in operation at the time of the trust’s enforcement?

A similar beneficiary

A trust could have an express clause covering what should happen if the beneficiary is permanently unavailable. But if there is none, the cy pres doctrine can apply. If the intended beneficiary of a charitable trust no longer exists or has turned into a new entity, the funds can be redirected to a similar organization with the same cause or consistent with the charitable intention of the grantor.

Instead of outright invalidating the trust, the court will look for alternative ways to carry out the original purpose of the trust.

Expecting the unexpected

Many people practice estate planning to prepare for the future in case anything happens to them. And like death, grantors do not know when their supported charity organizations will end. If grantors want to avoid any issues in case the charity of their choice ceases to exist at the time of the trust’s execution, they should carefully write their trusts with unexpected situations in mind.