There are a number of
reasons that a donor might conceivably wish to change the remainder
beneficiary of a charitable trust. Donors’ interests may
change over time, institutions’ needs may change, or a
donor may subsequently make an outright gift to one charitable
beneficiary and decide to remove that one from their trust,
as they feel they have otherwise fulfilled their gift intentions
for that charity.
It is rare to see the
retention of the power to change the charitable beneficiary
of a trust where the trust was prepared by a donor and his or
her advisors with the help of a charitable interest. On the
other hand, the power to replace the remainder beneficiary is
very common, if not the norm, in trusts prepared by donors with
the help of their advisors with little or no participation by
charitable interest in the process. In fact, it would arguably
constitute malpractice were an attorney not to tell a client
that they could retain this right. With the growth of interests
in charitable trusts among for-profit advisors has come an increase
in the number of charitable remainder trusts where the charitable
remainder interest is changeable and thus essentially equivalent
to a bequest expectancy, remainder interest in a retirement
plan, or other revocable gift.
What to do?
When charitable organizations
or institutions are notified of their inclusion in a charitable
remainder trust where the donor has worked with outside advisors
to create the trust without the knowledge of the charitable
beneficiary, the charity involved should have a well thought
out procedure and begin to execute it immediately.
If recognition is being
sought for a gift, it may be legitimate to request a copy of
the trust to determine the exact nature of the charity’s
interest. The possibility for bestowing recognition for a gift
offers the opportunity to discuss the feasibility of making
a revocable provision permanent.
If an organization offers
recognition for bequest expectancies in campaigns and as part
of other fund development efforts, it may be more difficult
to use recognition in a campaign as a way to encourage irrevocability.
As noted earlier, where
it is determined that the charitable remainder interest in question
is, in fact, revocable and the donor is not open to making the
gift permanent, the gift is very similar to a bequest expectancy
and should be treated accordingly. The intended charitable remainder
recipient may want to consider enrolling the donor in a gift
recognition society, maintaining personal contact through visits,
inviting the donor to special events, sending birthday cards,
and engaging in other similar relationship-building activities.
It is incumbent upon the future charitable recipient of the
trust to help maintain the donor’s interest in the organization
just as in the case of a bequest expectancy.
Effective ongoing communication
with donors who have included an organization as the remainder
interest in a trust may act as an early warning system if a
problem is in the making. Keeping in touch with the donor, in
much the same way you would communicate with a bequest donor,
can mean the difference between your organization’s receiving
the charitable remainder or forfeiting the trust assets to other
charitable interests that have done a more effective job stewarding
their relationship after the completion of the trust.
Final thought
Note, too, that just as it is possible to be removed as
a remainder beneficiary of a trust, it is also possible for
your organization to be added to such a trust already in existence.
This may occur as a replacement of or in addition to the existing
beneficiary. Donors who have charitable remainder trusts with
revocable beneficiaries may be thought of as persons who have
a “pocket” from which they can make major commitments
simply by changing a beneficiary and/or making an existing designation
irrevocable.
This is important to keep
in mind when considering the various ways donors can fulfill
campaign and other gift commitments in an era that will increasingly
be marked by gift planning activities that are driven by donors
and their advisors apart from organized fund gathering efforts.
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