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Trusts • Charitable and Honorary Trusts
TRUSTS#013
Legal Definition
An honorary trust is a trust with no ascertainable beneficiary that concerns no substantial benefit upon society, and often involves care for pets or the maintenance of a cemetery plot.
As a result, the trustee is not required to carry out the settlor's goal, but may choose to do so if they wish. There is also a problem with the Rule Against Perpetuities, because there is no measuring life. As such, some courts strike them altogether, while others allow them to endure for 21 years after which there is a resulting trust.
As a result, the trustee is not required to carry out the settlor's goal, but may choose to do so if they wish. There is also a problem with the Rule Against Perpetuities, because there is no measuring life. As such, some courts strike them altogether, while others allow them to endure for 21 years after which there is a resulting trust.
Plain English Explanation
Trusts generally need a beneficiary, and beneficiaries need to be human (or at least groups of humans hiding behind an organization or corporation). For example, you can't leave $1,000 to your favorite tree. As cute as it would be to see a tree dangling a bag of cash, it just doesn't work that way. The closest we can get to beneficiaries that are not people are "honorary trusts," which are more like "extended maintenance plans."
For example, if an 80 year old man buys a puppy, there's a decent chance the puppy will outlive the old man. Maybe the old man has family who will take the dog upon his death, or maybe he doesn't mind the dog being sent to a shelter. But another option would be to create an honorary trust where a trust is funded with money to take care of the animal's needs and a trustee is appointed to make sure the dog is taken care of for the remainder of its life (or until the trust runs out of cash). Another common use of honorary trusts is maintenance of burial places. Graves get overrun by weeds, grass, vandalism, etc. It's nice if family is around to help take care of it, but sometimes it's easier just to create a trust to cover this maintenance.
Most importantly, the reason these are called "honorary trusts" is because the trustee is only bound to perform "on their honor." This means that if at any point the trustee changes their mind, they are free to bail and abandon the trust, which would then turn the trust into a "resulting trust" (meaning the money leftover in it would be given back to the family/heirs/successors of its creator). Not all states are cool with these types of trusts, so it varies based on jurisdiction.
For example, if an 80 year old man buys a puppy, there's a decent chance the puppy will outlive the old man. Maybe the old man has family who will take the dog upon his death, or maybe he doesn't mind the dog being sent to a shelter. But another option would be to create an honorary trust where a trust is funded with money to take care of the animal's needs and a trustee is appointed to make sure the dog is taken care of for the remainder of its life (or until the trust runs out of cash). Another common use of honorary trusts is maintenance of burial places. Graves get overrun by weeds, grass, vandalism, etc. It's nice if family is around to help take care of it, but sometimes it's easier just to create a trust to cover this maintenance.
Most importantly, the reason these are called "honorary trusts" is because the trustee is only bound to perform "on their honor." This means that if at any point the trustee changes their mind, they are free to bail and abandon the trust, which would then turn the trust into a "resulting trust" (meaning the money leftover in it would be given back to the family/heirs/successors of its creator). Not all states are cool with these types of trusts, so it varies based on jurisdiction.
Hypothetical
Hypo 1: Bob's wealthy aunt Agnes dies and leaves $50,000 in a trust for her pet parrot Polly, with Bob appointed as trustee. Bob continues caring for Polly for a few years. When Bob realizes how much work Polly is, he decides being trustee is too burdensome. Bob resigns as trustee, leaving no one to care for Polly. Result: This is an honorary trust since Polly is not a human beneficiary. As trustee, Bob could resign at any time, since he was not obligated to carry out the honorary trust. When Bob resigns, the remaining trust funds revert back to Agnes's estate.
Hypo 2: When Sam dies, he leaves instructions for a trust to perpetually maintain his elaborate pyramid-shaped tomb, with his friend Ed as trustee. After 10 years, Ed decides maintaining the tomb is too much work. Ed resigns as trustee, and the trust for the tomb is terminated. Result: This honorary trust for maintenance of Sam's burial place is optional for Ed to carry out. When Ed resigns, the trust terminates and remaining funds go back to Sam's estate.
Hypo 3: Amy's will establishes a trust to maintain a specific bench in a local park, with annual payments for the upkeep of the bench. After 15 years, the city decides to redevelop the park land for affordable housing. The city petitions to terminate the trust. Result: This is an honorary trust, as it does not have a charitable purpose benefiting the public at large but is instead for the maintenance of a specific bench. Since the trust does not have human or charitable beneficiaries, the court can terminate the honorary trust, and the remaining funds may revert to Amy's heirs.
Hypo 2: When Sam dies, he leaves instructions for a trust to perpetually maintain his elaborate pyramid-shaped tomb, with his friend Ed as trustee. After 10 years, Ed decides maintaining the tomb is too much work. Ed resigns as trustee, and the trust for the tomb is terminated. Result: This honorary trust for maintenance of Sam's burial place is optional for Ed to carry out. When Ed resigns, the trust terminates and remaining funds go back to Sam's estate.
Hypo 3: Amy's will establishes a trust to maintain a specific bench in a local park, with annual payments for the upkeep of the bench. After 15 years, the city decides to redevelop the park land for affordable housing. The city petitions to terminate the trust. Result: This is an honorary trust, as it does not have a charitable purpose benefiting the public at large but is instead for the maintenance of a specific bench. Since the trust does not have human or charitable beneficiaries, the court can terminate the honorary trust, and the remaining funds may revert to Amy's heirs.
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