Protecting a charitable trust when an heir tries to access it

As a not-for-profit business or charitable organization, you depend largely on the generosity of donors. Donations can take many forms. Some people like to give monthly gifts, while others will give a lump sum in December to help with their tax liability. Still others choose to leave behind a portion of their assets in their last will to charities that they support.

Many times, people take the step of creating a charitable trust and then funding that trust with assets either while they are alive or upon their death. When a person takes the time to create a charitable trust, that makes it pretty clear they intend to create a legacy that involves giving back. Sometimes, their heirs and family members have other ideas about that money.

Family members and heirs should respect the last wishes of the deceased

Sadly, many people poised to inherit money just want to maximize their personal benefit. They might not care about the legacy of their loved one. That can lead to someone challenging a charitable trust in the hopes of gaining control of the assets that fund the trust.

Some people might contest the creation of the trust and try to get that money back in probate court. Others might try to siphon money off of the trust to use for personal reasons. As a nonprofit or charity, your organization must be proactive in protecting charitable trusts and similarly inherited donations.

Ideally, your organization can work with donors prior to their deaths

One of the best ways to protect inherited assets is to have a clear paper trail for each of those charitable trusts. The earlier in life a donor makes a charitable trust, the more difficult it will be for heirs and family members to contest the existence of the trust.

After all, it is hard to make a claim of undue influence or mental incapacity if the deceased created the trust well before they entered the retirement stage of their life. Of course, that doesn’t mean you should turn away assets from older donors.

It is simply important to document the mental state of the person signing the trust and to do everything in your power to ensure no one is coercing or manipulating potential donors. That could help you in the future if someone else is unhappy about that charitable donation to your organization.


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