Many people understand the basic and most common purpose of trusts: to control and protect property for the benefit of a specific person - not the party who contributed the property. The ordinary trust involves three separate parties:a gifting party (settler), an intermediary party who will hold the gifted property (trustee), and a party who will enjoy the benefits associated with the gifted property (beneficiary). What most people don't know is that trusts can be an effective way to accomplish charitable gift giving.

There are few difficult rules governing who can be a trust's beneficiary. Generally, the law requires that trust beneficiaries be ascertainable, or are identifiable by the court. The law requires that a beneficiary's status not be violated by the rule against perpetuities and also, that a trust's beneficiary cannot act as both settlor and trustee for that trust.

Ordinarily, trusts are created to allow one party to give a controlled gift to another party. Most frequently, this sort of arrangement is used when parents want to control gifts given to one or more children that are not yet capable of properly utilizing the property, for some reason or other.

There is, however, another application for trusts that is less commonly seen, but is still just as important. This application is called the charitable trust, or a trust that expresses a charitable purpose. Such purpose distinguishes charitable trusts from ordinary trusts, and a court will be very careful to ascertain whether or not a trust was indeed created for the purpose of charitable giving in order to give effect to the settlor's wishes.

The current law suggests that a trust in any one of the following categories would qualify as a charitable trust: 1) to relieve poverty, 2) to advance education, 3) to advance religion, 4) to promote health, 5) for government or municipal purposes, or 6) for other purposes that, if accomplished, would benefit the community.

Perhaps the single most important thing to know about creating a charitable trust is that the courts tend to construe the six categories very narrowly. The trust ought to be as direct and clear as possible when pointing to one of the six categories as its purpose. Of course, as with most aspects of trust law, the burden of such a narrow group is balanced by a substantial benefit– charitable trusts are not subject to the rule against perpetuities in the same fashion as many other gifts. Of course, this exemption does create the potential problem that a given trust might last forever where the exact purpose for which it was created cannot be achieved. In such cases, courts will employ a kind of saving technique; the court tries to make sure that the initial interest of the settlor is met as effectively as possible.

Additionally, charitable trusts are unlike other trusts in that they may benefit either a single person or some limited group, provided that some large section of the benefited community had the opportunity to become a member of the beneficiary class. Because the beneficiaries of the charitable trust are members of the greater community, the state, and not some specified trustee, is generally responsible for the enforcement of the terms of the trust.

Creating a charitable trust is a great way to give more to your favorite charity. By keeping your assets out of probate and saving on your tax bill, you will have even greater assets to pass on to your favorite cause. For more information on creating your own charitable trust, talk to an experienced attorney.