Many California residents establish charitable trusts as part of their estate plans. A charitable trust allows them to enjoy a reliable income stream while donating or designating assets to tax-exempt charitable organizations and thereby reaping tax-advantaged benefits.
Trustees are accountable for how they manage charitable remainder trusts and other charitable trusts, which are generally irrevocable. The trust’s beneficiaries have interests they have a right to see met. A trustee’s failure to perform as required by the bylaws of a trust may be litigated and result in sanctions against the trustee.
Whether you are a beneficiary trying to assert your rights and protect your interests or a trustee trying to comply with your duties, a charitable trust attorney from Albertson & Davidson, LLP, can assist you. A trust beneficiary will need skilled representation to examine the accounting provided by the trustee and determine whether the trust’s financial reporting indicates actions that should be challenged. Trustees have the burden of proof in response to lawsuits and must establish that their actions were reasonable under the circumstances.
At Albertson & Davidson, LLP, our legal team has experience defending and challenging the actions of trustees. Our in-depth knowledge of trust and estate law in California enables us to determine whether fiduciaries are meeting their legal obligations and to help beneficiaries assert their rights. If you are a trustee, estate executor, or the beneficiary of a trust and you have concerns about the proper administration of a charitable trust, contact one of our experienced charitable trust attorneys. We have offices conveniently located throughout California, so please contact Albertson & Davidson, LLP for help today.
Types of Charitable Trusts
Charitable trusts are set up to provide the designated beneficiaries an income derived from returns on the trust investments while also giving assets to charity, which results in a lower tax burden. A charitable trust established in California will be either a charitable remainder trust or a charitable lead trust.
A charitable remainder trust (CRT) is designed to generate revenue for the trust creator or other designated beneficiaries for life or for a set term of up to 20 years. Upon the death of the last designated recipient or the scheduled cessation of income distribution, the remaining assets of the trust are distributed to charity.
There are variations of the CRT:
- Charitable remainder unitrusts provide designated beneficiaries a percentage of the trust’s assets every year. This requires the value of the trust to be reappraised annually.
- Charitable remainder fixed annuity trusts provide beneficiaries with a fixed dollar amount or an annuity every year. The amount of the distribution remains the same regardless of the trust’s earnings.
- Charitable lead trusts provide a set amount of their income to a charitable organization before distributing the remaining assets to the grantor’s beneficiaries with tax savings.
Benefits of a Charitable Trust
When the initial contribution to a charitable trust is made, the grantor avoids paying capital gains taxes that would be due if the assets being transferred were sold outright. Donations made by the charitable trust can help reduce the value of the trust grantor’s estate and reduce estate taxes on larger estates.
During its existence, a charitable remainder trust can provide income to the creator of the trust or their heirs. If a charitable lead trust has been established, the remaining balance of the trust reverts to the donor or their heirs when the established donation period ends.
Complications of Having a Charitable Trust
The initial contribution to a charitable trust must accomplish the dual goals of providing a significant donation to the charity and providing income to its beneficiaries. The trust is irrevocable once established because of its tax advantages. It is crucial to fund and design a trust properly.
Administering a charitable trust, particularly when there are multiple beneficiaries, can be complicated. A trust’s fiduciary has multiple duties and is held to the highest duty of care for every act they undertake.
The trustee of a CRT is required to administer the trust with the care, skill, and conduct that a reasonably prudent person would in order to carry out the terms of the trust. The duties include:
- Executing the terms of the trust and meeting any obligations imposed by law on the trust.
- Investing trust assets as a prudent investor would while generally endeavoring to invest assets productively, including diversifying investments where appropriate.
- Avoiding conflicts and remaining loyal to the trust beneficiaries’ interests. Administering the trust to the benefit of someone other than the beneficiaries could be an actionable violation.
- Maintaining accurate records and regularly reporting to beneficiaries about trust assets, income, and expenses.
Beneficiaries may seek legal relief if it can be determined that the trustee has breached his or her fiduciary duties or has threatened such a breach. Parties with standing may contest a trust by filing for a trust accounting, which will result in the court ordering the finances of the trust disclosed. Once the trust’s activities have been investigated and each side presents its case, the court will decide whether the trustee has acted in a reasonable manner.
Remedies for misconduct may range from forcing the trustee to carry out their duties as required to setting aside acts and decisions made by the trustee, removing and replacing the trustee, recovering money and property wrongfully disposed of, assessing damages to be paid by the trustee, and other actions as required to make things right.
Contact Our California Charitable Trust Litigation Attorneys
At Albertson & Davidson, LLP, our attorneys understand the complexity of California trust litigation cases. We know the types of evidence to seek to establish that trust administrators are not living up to their legal duties. Our attorneys are trial lawyers and have the legal know-how to stand up for the rights of beneficiaries.
We are here to help in the pursuit of fairness and justice for California trust beneficiaries. The experienced charitable trust attorneys at Albertson & Davidson, LLP can advise you on your options and represent you in court. Please contact us today.
