Limitations on Charitable Trusts

Mortmain Acts

As a protection to beneficiaries, some states still have laws (known as “Mortmain Acts”) that restrict the amounts that can be left by will to a charity or invalidate some or all “last minute” gifts to charities. They could either take the form of limiting the amount of a charitable bequest (e.g., one-third of the estate) or voiding a bequest made within a certain time period before the testator’s death (e.g., 30 days). Such statutes generally were inapplicable to inter vivos trusts (trusts taking effect during the life of the settlor). See, e.g., City Bank Farmer’s Trust Co. v. Charity Organization Society, 238 App. Div. 720 (1933).

EXAMPLE: Shortly before her death, Irma executed a will devising her five acres of land to José in reliance on José’s oral promise that he would hold the land in trust for the United Methodist Church. Upon José’s refusal to perform his promise, a constructive “secret” charitable trust would normally be imposed but, to the extent it falls within a Mortmain Act (applicable to testamentary and constructive charitable trusts), the statute would apply to invalidate the gift. See, e.g., In re Stirks Estate, 232 Pa. 98 (1911).

Rule Against Perpetuities

Unlike with private trusts, the common law Rule Against Perpetuities (“Rule”) does not apply to the duration of charitable trusts. Rather, charitable trusts can continue perpetually. Thus, the restriction on shifting does not apply for a vested interest that shifts from one charity to another charity. However, a shift in purpose from charitable to private that may vest beyond this period is invalid, as that is a private interest, not a charitable interest.