Charitable Trusts

Marsh v. Frost National Bank, 129 S.W.3d 174 (Tex. App.—Corpus Christi-Edinburg 2004, pet. denied).


Testator’s will contained a provision requiring the executor to sell certain property, invest the proceeds, and later to turn the property over to the United States President, Vice-President, and Speaker of the House as trustees. The money is be invested until it is sufficient to create a trust with $1,000,000 for every American who is 18 years old or older with no one being denied a share due to race, religion, marital status, sexual preference, or the amount of wealth.. Testator anticipated this would take 346 years.

Executor filed this action to obtain a construction of this gift. Heirs argued that Testator attempted to create a private trust which failed because it violated the Rule Against Perpetuities. The Attorney General intervened under Property Code § 123.002 and argued that Testator established a charitable trust. The trial court found that the trust was charitable.

The appellate court reversed. After recognizing that whether a given purpose is charitable is a question of law for the court to decide, the court began its analysis by looking at the traditional categories of charitable purposes as set out in Restatement Second of Trusts § 368:

(a) the relief of poverty;
(b) the advancement of education;
(c) the advancement of religion;
(d) the promotion of health;
(e) governmental or municipal purposes;
(f) other purposes the accomplishment of which is beneficial to the community.

The court reasoned that the only category in which Testator’s purpose potentially might fall is the last category.

The court concluded that Testator’s purpose was not charitable because it did not go beyond merely providing financial enrichment to individual members of the community. The court explained that the purpose must promote the social interest of the community as a whole. A trust to distribute money without regard to the donees’ financial needs or how the donees must use the money does not show that Testator had the requisite intent to benefit the public despite Testator’s generosity and benevolence.

The court recognized that there is a strong presumption in favor of charitable trusts and that they should be construed liberally to uphold their validity. But, in this case, there was no charitable intent and thus it would be inappropriate to apply liberal construction rules to create a charitable intent where none exists.

Because the trust is not charitable, the court agreed that it violated the Rule Against Perpetuities as stated in Trust Code § 112.036. Accordingly, Property Code § 5.043 is triggered which authorizes the court to reform or construe the trust according to the doctrine of cy pres to give effect to the general intent of Testator within the limits of RAP. Testator’s general intent was to create a trust to financially enrich the American public. The court remanded the case to the trial court to determine the feasibility of reforming Testator’s bequest.

Moral: A person desiring to establish a charitable trust must make certain that his or her purpose will be deemed charitable by a court. The person’s belief that the purpose is charitable is not sufficient.