Some Ohio residents who are creating an estate plan may find a charitable trust useful. A charitable trust is different from a noncharitable trust in several ways, but its primary difference is in laws regarding perpetuity.
Unlike other trusts, a charitable trust does not have to name a beneficiary. Instead, it only needs to state its intent, and that intent must be of benefit to a large section of the public. A charitable trust is also not subject to the Rule Against Perpetuities. Where laws resist using a trust to keep private property within a family or used in some other way for perpetuity, the opposite view is taken toward charitable trusts. In fact, a third difference in a charitable and noncharitable trust is that the charitable trust is set up so that it can be modified in order to save it from failing.
This is known as the “cy pres doctrine.” One way that a trust might potentially fail is if it is set up to support a nonprofit that ceases to exist. With the cy pres doctrine, it would be possible to direct the funds toward a nonprofit that had the same purpose. Another example is a charitable trust from 1899 that was set up to help orphans from the age of 6 to 10. The upper age was changed by the court to 18.
In addition to charitable donations, trusts can be useful in a number of other ways. They can help reduce estate taxes, care for relatives with special needs or preserve wealth for generations. Trusts are not just for wealthy families, and people who would like more control over how beneficiaries receive assets might want to talk to an attorney about how a trust can do this. For example, distributions may only occur at certain milestones or with the approval of a trustee.