The Law Offices of Kelly J. McDonald, PLLC - Probate, Elder Law, & Special Needs

Differences between charitable and other trusts

Charitable trusts can be useful tools for estate planning in Arizona. They often convey tax incentives and other benefits to the person planning the estate. There are a few things that distinguish charitable trusts from other trusts. First, they have a charitable purpose. Charitable purposes might include advancing religion or education, combating poverty, promoting health initiatives or otherwise benefiting the public.

Generally, charitable trusts, unlike other trusts used in estate planning, are not required to have a definite, ascertainable beneficiary. Rather, the beneficiary is assumed to be the community of people to which the economic and social benefits of the trust are conveyed. Instead of naming a specific beneficiary, the person who makes a charitable trust need only describe a purpose that has a benefit to the public.

These trusts are also usually not subject to the rule against perpetuities that is often relevant in estate planning. The rule against perpetuities, broadly, prohibits estate planning that would restrict the use of an asset for too long a period. With regard to charitable trusts, though, the prohibition is lifted because the assets are theoretically being used for the public good.

Courts will typically apply the cy-près doctrine to prevent a charitable trust from failing. That is, if the trust is created with a purpose restriction that cannot be met, the court will modify the trust so that its purpose can be carried out more generally, rather than allowing the trust to fail.

People in Arizona who are considering their estate plans might want to speak with a lawyer. A lawyer with experience in estate planning law may be able to help by examining the client's assets and liabilities and developing a plan that efficiently distributes assets to heirs. A lawyer might suggest the use of a charitable trust or another type of trust to avoid probate and gain tax benefits.

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