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.