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Abstract: 

The term “charitable trust” applies to any trust with a stated purpose of benefitting a charitable entity. Charitable trusts appear in a variety of forms: (1) tax exempt charitable trusts qualified under IRC §501(c)(3); (2) non-exempt charitable trusts; (3) split-interest trusts, including charitable remainder trusts and charitable lead trusts; and (4) charitable bequests. As a general rule, under state law, the attorney general represents the public interest in charity and acts to protect the interest held in trust. Trusts that are exempt under IRC §501(c)(3) also are subject to corresponding requirements and restrictions including the prohibitions on private benefit and private inurement and Form 990 reporting. Exempt trusts that are further subclassified as private foundations are subject to the requirements and restrictions found in Chapter 42 of the Internal Revenue Code: (1) the net investment income tax; (2) annual distribution requirements; (3) the prohibition on self-dealing; (4) the restrictions on excess business holdings; (5) the prohibition on jeopardizing investments; and (6) the prohibition on taxable expenditures. IRC §4947 extends the private foundation provisions to non-exempt charitable trusts and split-interest trusts. This article explores some practical issues that arise in the context of a private foundation that is organized as a charitable trust, and the approaches one might take to solve problems that occur.

Keywords: Testamentary Trusts; Split Estates; Trusts Classified as Supporting Organizations

Affiliations:  1: Strasburger & Price LLP.