Establishing and Administering a Charitable Trust

estate plan, charitable trust, charitable gift, Illinois estate planning lawyer, Naperville attorneyEstate planning is a fairly new concept. It used to be that parents did not think twice about leaving everything to their children. Today, however, with the advent of charitable giving and changing family norms, people have more options to consider when writing their wills. If you choose to make “nontraditional” bequests – or, more specifically, if you choose to make bequests that might surprise your family – it is in your best interest to discuss these decisions with your loved ones to avoid potential challenges to your will.

The Responsibilities of the Charitable Trustee

One way to make a charitable gift is to establish a charitable trust. When you establish a trust, you designate a trustee who is legally obligated to administer the trust for the specified purpose. Choosing a trustee is an important decision, so you should pick someone who will not have trouble fulfilling his or her legal obligations. Under the Illinois Charitable Trust Act, charitable trustees have eight defined duties (but they are not limited to those duties):

  1. The charitable trustee must avoid “self-dealing” and any conflicts of interest;
  2. The charitable trustee cannot waste charitable assets;
  3. The charitable trustee must avoid incurring penalties, fines, and unnecessary taxes;
  4. The charitable trustee must ensure that the organization adheres to its specific charitable purpose;
  5. Generally, the charitable trustee may not make non-program loans, gifts or advances to any person;
  6. The charitable trustee must utilize the trust so that it conforms to its purpose and works in the best interest of its beneficiaries;
  7. The charitable trustee must timely file registration and financial reports, and must also keep accurate records; and
  8. The charitable trustee must ensure that the trust complies with Illinois law.

If the trust runs out of money, or if other circumstances change, the trustee might need to terminate the trust. First, the trustee must determine that continued administration of the trust is impractical due to small size or because changed circumstances adversely affect the charitable purpose. Second, he or she must gain consent from the state Attorney General and then notify each benefiting charitable organization. The law allows the trustee to amend the governing instrument to the extent necessary to terminate the trust and transfer any remaining assets.

To be clear, there are only three reasons the Attorney General will consent to terminating a charitable trust:

  • The trust’s small size makes continued administration impractical;
  • The trust’s charitable purpose can no longer be fulfilled; or
  • Other changed circumstances make it impossible to fulfill the donor’s general intent.

Contact an Estate Planning Attorney for Help

As the donor, it is important to express your wishes regarding administration of the trust and your wishes in the event of changing circumstances. This is true with any trust, whether charitable or for some other purpose. Our experienced estate planning attorneys can help you fulfill these wishes and ensure that you are prepared for possible contingencies that could arise after you are gone. As a trustee, we can help you fulfill your legal obligations and ensure that you are adhering to the donor’s wishes. Contact us today for a consultation. We can assist those in the Naperville area.