Creation and Modification of Charitable Trusts

• Author: Browne C. Lewis
• Pages: 201-236

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Chapter 7 - Creation and

Modification of Charitable Trusts

In order to create a charitable trust the testator must satisfy all of the requirements to

create a private trust (intent, beneficiaries, res and writing) and intend for the trust to be used

for a charitable purpose. Courts have more flexibility when it comes to modifying the terms

of a charitable trust. In some cases, courts can even repurpose the funds in the trust.

7.1 Creation of the Charitable Trust

To qualify as a charitable trust, the trust must have a valid charitable purpose that

benefits an indefinite class of persons. Charitable purposes include: (1) the relief of poverty;

(2) the advancement of education; (3) the advancement of religion; (4) the promotion of

health; (5) government or municipal purposes; and (6) other purposes the accomplishment

of which is beneficial to the community.

Problems

Which of the following trusts have a charitable purpose?

a). A trust to establish a museum to display the love letters the settlor wrote to his wife.

b). A trust to conduct stem cell research.

c). A trust to provide gym memberships to residents that are at least fifty pounds overweight.

d). A trust to plant a community garden.

e) A trust to build a house for the minister of a church.

f) A trust to send the members of a church choir on an annual vacation.

g) A trust to pay the salary of a law professor.

h) A trust to send Tina to college if she promises to teach in the testator’s hometown.

Marsh v. The Frost National Bank

, 129 S.W.2d 174

Opinion by Justice Rodriguez.

This is a declaratory judgment action. Appellants, Anna Spohn Welch Marsh, Noel

Marsh, and Holly McKee, appeal from a probate order that modified a provision in the will

of Charles Vartan Walker, deceased. Appellants raise four issues on appeal: (1) whether the

trial court properly applied the cy pres doctrine to reform a will provision and (2) whether the

trial court correctly ruled that tract 3 with its associated income, rather than the proceeds of

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the sale of that land, should be conveyed to the charitable beneficiary based on the cy pres

reformation; We reverse and remand.

I. Factual Background

Charles Walker died on March 13, 2000, leaving a holographic will. The will named

appellee, Frost National Bank (Frost Bank), as independent executor. On July 11, 2000,

Frost Bank filed an original petition for declaratory judgment for clarification of several

probate matters including the construction of Article V of the Charles Walker will, the

provision at issue in this appeal. Article V reads in relevant part:

I hereby direct my Executor to sell tract 3 of the V.M. Donigan 456.80

Partition for cash and to invest the proceeds in safe and secure tax-free U.S.

government bonds or insured tax-free municipal bonds. This trust is to be

called the James Madison Fund to honor our fourth President, the Father of

the Constitution. The ultimate purpose of this fund is to provide a million

dollar trust fund for every American 18 years or older. At 6% compound

interest and a starting figure of $1,000,000.00, it would take approximately 346

years to provide enough money to do this. My executor will head the Board of

Trustees.... When the Fund reaches $15,000,000 my Executor's function will

cease, and the money will be turned over to the Sec. of the Treasury for

management by the federal government. The President of the U.S., the Vice

President of the U.S., and the Speaker of the U.S. House of Representatives

shall be permanent Trustees of the Fund. The Congress of the United States

shall make the final rules and regulations as to how the money will be

distributed. No one shall be denied their share because of race, religion, marital

status, sexual preference, or the amount of their wealth or lack thereof....

Appellants filed an answer to the petition for declaratory judgment alleging that

Article V of the will is void under the rule against perpetuities. Appellee, John Cornyn, Texas

Attorney General, intervened in this action pursuant to section 123.002 of the Texas

Property Code alleging that a general charitable intent could be found and that Article V of

the will created a charitable trust. See Tex. Prop. Code Ann. § 123.002 (Vernon 1995). The

Attorney General then moved for the application of the cy pres doctrine to Article V. After a

hearing on this issue, the trial court found in relevant part that: (1) the will evidenced a

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general charitable intent; (2) Article V of the will established a valid charitable trust not

subject to the rule against perpetuities; (3) the Attorney General's request to have the court

exercise its cy pres powers should be granted; and (4) attorney's fees should be awarded to the

Attorney General. The order was signed with the modification of the trust and charitable

beneficiary to be determined after a second hearing. The second hearing was held before a

different judge. After reconsidering the previous order, the second judge confirmed and

ratified that order and signed a final judgment establishing the modifications of Article V.

This appeal ensued.

II. Interpretation of Article V

In their first issue, appellants argue that Article V does not show a charitable intent

and therefore is not subject to reformation under the cy pres doctrine. Furthermore,

appellants argue that because Article V violates the rule against perpetuities and cannot be

legally reformed, it is void, and the proceeds of the land that would fund the trust should

pass through intestate succession.

In Texas, under the rule against perpetuities, an interest is not good unless it must

vest, if at all, not later than twenty-one years after some life in being at the time of the

creation of the interest, plus a period of gestation. Id. § 112.036; see Foshee v. Republic Nat’l

Bank, 617 S.W.2d 675, 677 (Tex. 1981). Both perpetual trusts and trusts for an indefinite

duration violate the rule against perpetuities and are void. Atkinson v. Kettler, 372 S.W.2d 704,

711 (Tex. Civ. App.-Dallas 1963), aff'd, 383 S.W.2d 557 (Tex. 1964). The rule against

perpetuities does not, however, apply to charitable trusts. See Tex. Prop. Code Ann. . §

112.036 (Vernon 1995); Foshee, 617 S.W.2d at 677. Therefore, we must first address whether

Article V of the will establishes a trust for a charitable purpose.

Whether or not a given purpose is “charitable” is a question of law for the court to

decide. Frost Nat’l Bank v. Boyd., 188 S.W.2d 199, 206 (Tex. Civ. App.-San Antonio 1945),

aff'd, 145 Tex. 206, 196 S.W.2d 497 (1946). When an issue turns on a pure question of law,

we apply a de novo standard of review, Tenet Health Ltd. V. Zamora, 13 S.W.3d 464, 468

(Tex. App.-Corpus Christi 2000, pet. dism’d w.o.i. (citing State v. Heal, 917 S.W.2d 6,9 (Tex.

1996), and we are not obligated to give any deference to legal conclusions reached by the

trial court Id. at 468-69.