Charitable trusts serve the dual function of being a valuable estate planning tool and a way to help those in need. At its core, a charitable trust is just a trust with a charitable purpose, but there are a few important differences that people need to consider before creating one. According to Colorado law, a charitable trust must benefit the community. This can include contributing to the relief of poverty, the advancement of education, the promotion of heath, and even governmental or municipal purposes.
A few rules that apply to normal trusts don’t apply to charitable ones. Because these trusts are intended for the general well-being of the community, they don’t require clearly defined beneficiaries. Instead, the trust must have a clear purpose whether it’s to fund local hospitals or provide food aid to the poor. Charitable trusts are also allowed to exist into perpetuity.
In order to maintain trusts into perpetuity so that they can continue to help the community, courts apply the Cy Pres doctrine. This doctrine allows a trust to be modified when it can no longer fulfill a specific purpose. If a trust was created to give money to a specific hospital that ends up closing, the trust could be modified to give to a different healthcare provider.
Individuals or families who wish to create a charitable trust when estate planning may seek support and guidance from an attorney. Trusts can be highly complex documents that need to follow a wide range of regulations, so it’s important for attorneys to keep up with any changes in state or federal laws. It’s also the responsibility of a lawyer to ensure that the language in the trust matches the expectations of their client.