Trusts, Public and Private – II

Trusts, Public and Private – II

An express trust is either public or private. A public trust, also known as a charitable trust, is an express trust created for a charitable purpose. If an express trust is not a charitable trust, it is deemed to be a private trust. A private trust is an express trust created to benefit a few persons. This article discusses some aspects of public and private trusts.

Stated Charitable Purpose

The requirements of public and private trusts are similar, with a few exceptions. The most important difference between a public trust and a private trust is that a public trust must state a charitable purpose.

Cy Pres

Sometimes the stated purpose of a public trust is impossible or impractical to carry out. For example, the local high school cannot be renovated when it already has been renovated since that purpose was stated in the trust.

When the stated purpose of a public trust is impossible or impractical to carry out, a court may invoke the doctrine of cy pres (“as near as”). Under the doctrine of cy pres, where the stated purpose of a public trust is impossible or impractical to carry out, a court can order the trust property to be applied to another charitable purpose similar to the stated charitable purpose. For example, the court may order the local middle school to be renovated rather than the local high school.

A court does not need the consent of the settlor or the trustee in order to apply the doctrine of cy pres. If, however, a trust states that it is for a specific charitable purpose and the trust is to terminate if that specific charitable purpose fails, the trust fails.

Definite Beneficiaries

A private trust must have definite beneficiaries. Unlike a private trust, a public trust may have indefinite beneficiaries with a defined class (e.g., the homeless persons aided by Catholic Charities). A public trust may have indefinite beneficiaries with a defined class, as long as there are indefinite beneficiaries within the defined class who actually receive the benefit of the trust (e.g., homeless persons are aided by Catholic Charities).

A public trust may also simply leave trust property “to charity.” When trust property is simply left “to charity,” the selection of the particular charitable purpose is left to the discretion of the trustee.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.