Enforcing Designated Gifts to Charity

Court rules church and school lack standing to enforce a charitable trust.

Church Finance Today

Enforcing Designated Gifts to Charity

Court rules church and school lack standing to enforce a charitable trust.

The Alabama Supreme Court ruled that a church lacked standing to enforce a charitable trust that was created to distribute income to religious and charitable institutions. An elderly man died in 1950 leaving a will that created a charitable trust. The trust provided that, after the payment of nominal sums to family members, the bulk of the trust’s income was to be distributed to local religious and charitable institutions.

Fifty years later, a church and school filed a lawsuit seeking to have a court compel the enforcement of the trust. A trial court dismissed the lawsuit on the ground that the church and school lacked “standing” to enforce the trust. On appeal, the state supreme court affirmed the trial court’s decision. It began its opinion by observing: “The prevailing view of other jurisdictions is that the attorney general does not have exclusive power to enforce a charitable trust and that a person having a sufficient special interest may also bring an action for this purpose.”

The court noted that “beneficiaries of a charitable trust have a right to maintain a suit to enforce the trust or prevent diversion of the funds,” but only if they had a vested interest in benefiting from the trust: “Here [the church and school] are merely potential beneficiaries of the trust and, as such, necessarily do not have the sufficient special interest in the enforcement of the trust to entitle them to bring suit. Indeed, as the trustees argue, the difference in status—between a person or entity that has a vested or fixed right to receive a benefit from a charitable trust and a person or entity that might merely potentially receive a benefit in the discretion of the trustees—is at the very heart of the distinction between one who has a ‘special interest’ and, thus, standing to sue, and one who does not.” Rhone v. Adams, 2007 WL 2966822 (Ala. 2007).

This article first appeared in Church Finance Today, January 2009.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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