The struggles of the John E. and Sue M. Jackson Family Trust over the past decade demonstrate how vulnerable charitable trusts can be to violations of donor intent.
John and Sue Jackson created their wealth through the Pittsburgh-Des Moines Steel Company. In 1950, the Jacksons created a charitable trust, naming John’s brother, William R. Jackson, and the Commonwealth Trust Company of Pittsburgh (later the National City Bank of Pennsylvania) as co-trustees with equal voting power. Currently, John and Sue’s niece and nephew, Polly Townsend and Dick Jackson, are trustees with a combined 50% voting power; PNC Bank is the successor corporate co-trustee via multiple mergers and acquisitions. From the outset in 1950 through 2006, annual grant decisions were family-driven, with the bank managing investments and ensuring legal compliance.
From the beginning, the trust instrument provided that the trust would expire “three years after the date when its assets have been entirely deleted” and that there was “no limitation” on the amount of annual donations. The original grantors made it possible for them or their successors to add funding to the trust or simply to spend it out. In 2006, long after the donors had passed away, the two family trustees asked to terminate the trust, expressing their concerns that if it continued past their lifetimes, future trustees “will cause the trust assets to be distributed in a manner never contemplated by the grantors.” PNC’s predecessor, National City Bank, opposed the termination, and the court declined to terminate the Trust at that time.
In late 2008, PNC Financial acquired National City Bank and became the corporate trustee. Since then, the bank has made a number of changes with which the family trustees have disagreed: limiting grants to the IRS-mandated 5 percent payout per year, unilaterally directing donations to Pittsburgh-area charities without the family trustees’ consent, and rejecting grants to charities that support free-market and religious causes long supported by the Jackson Family Trust. In late November 2016, after years of disagreement over the proper role of donor intent, PNC filed an action in the Orphans’ Court to resolve a deadlock over 2016 donations. The Orphans’ Court ruled in PNC’s favor without hearing any evidence regarding grantor intent.
The appeal to the Superior Court of Pennsylvania filed by the family trustees in early 2017 vacated the Orphans’ Court’s order and directed the lower court to consider evidence of donor intent. Noting that the trust instrument’s grantmaking parameters were broad and ambiguous (“public charities created for religious, educational or other charitable purposes…”) and that the Trust vested broad discretion in the original trustees, the Superior Court recognized that the donors’ selection of their close family member, W.R. Jackson, Sr., was an expression of trust and confidence in his judgment. The opinion also said that because “the history of the trust’s giving is relevant,” the trial court should consider whether the limited role of the corporate co-trustee throughout the Trust’s history means that the grantors intended for the bank to defer to the family trustees on donation decisions. The court rejected both PNC’s exclusion of advocacy organizations and its insistence that preference be given to charities in western Pennsylvania, and asked the Orphans’ Court to work with the trustees to find an equitable remedy.
The Superior Court’s striking recognition of donor intent as key to maintaining the integrity of the Jackson Family Trust requires the three trustees to work together to resolve their differences around grantmaking in a way that honors the grantors’ wishes. The hearing on donor intent recently concluded and a decision from the lower court is expected in 2020.
The trust vehicle, as the Jackson Family Trust example shows, cannot always prevent donor-intent violation, especially when the trust instrument includes vague grantmaking instructions and future corporate co-trustees with significant voting authority fail to share or recognize the donor’s values. But a careful and determined donor can increase the odds that a trust will stay true to its intended mission over time.