Safeguarding your intent with a charitable trust

If you choose to use a non-operating foundation for your philanthropy, a trust is frequently the better vehicle to protect donor intent. Once your organizational structure and funding guidelines are in place with a trust, they can only be amended by court order unless a donor allows for such changes in the trust instrument. 

In theory, the rigidity of the trust instrument provides a buffer against donor-intent violations because amending the document would require legal action involving the attorney general in the state where your entity is established, and trustees would be required to convince both the attorney general and the court that the original purpose of the trust is either impossible or impracticable. In such cases, the courts may invoke the cy pres doctrine to devise a course of action that comes as close as possible to the trust’s original charitable purpose. Courts and attorneys general may vary, of course, in how narrowly or broadly they interpret your intent.

Be aware, however, that while a charitable trust structure generally offers the strongest shield against legally sanctioned breaches of donor intent, it is not a fail-safe mechanism. Within the last 50 years, serious violations of donor intent have occurred within charitable trusts when neither trustees nor grantees objected. For example, consider the struggles of the John E. and Sue M. Jackson Family Trust over the past decade. 

How Henry P. Crowell protected his intent with a charitable trust

There are, however, helpful examples of charitable trusts that continue to honor donor intent. Nearly a century after its creation, the Crowell Trust still reflects its original wealth creator’s values and vision as a grantmaking organization, focusing its $100 million endowment on supporting evangelical Christian organizations.

Seeing other foundations drifting during his lifetime—and witnessing the secularization of his church denomination—Henry P. Crowell (founder of Quaker Oats Company) gave great attention to protecting his donor intent. Some of the steps he took included:

  • clearly defining his intent in writing, not only explaining that the trust’s resources be used to promote evangelical Christianity but also detailing the doctrines that underpin that movement;
  • structuring his trust to be governed by five personal trustees and one corporate trustee, and delineating their duties to ensure that the personal trustees would be solely responsible for grant decisions and would also oversee the corporate trustee;
  • undertaking a long and thorough vetting of his trustees, requiring them to submit in writing their own values and visions. His original trustees—most of whom were personally familiar with his philanthropy—would select their successors, taking care that each future trustee would be “an avowed disciple of Jesus Christ…who unreservedly believes in and subscribes in writing to the objects and purposes of this trust”; and
  • finally, at every annual meeting, trustees read aloud the trust indenture that Crowell wrote, and also evaluate grants each year to ensure that recipient nonprofits aren’t drifting from the mission.