So Near and Yet So Far: Charitable Life After Death | Joanna L. Grossman | Verdict

Margaret Young was an artist and an art lover. She died in Orlando, Florida, in 2005. She left money in trust for one daughter, Kit Knotts, for life; and she left money in another trust for a second daughter, Dee Miller, also for life. After the death of each daughter, the money left in each trust was to go to the Orlando Museum of Art (OMA). But the gift to the museum was specific; the money was to go into the museum’s “Permanent Collection Fund, and used to add to their permanent collection.”

Knotts has now died, and her trust fund is worth $1,800,000. (Miller is still alive, and the current value of her trust is comparable.) OMA will accept this gift, of course, but they would like to use it for general operating expenses rather than solely to acquire new art for the permanent collection. Due in large part to a scandal having nothing to do with this trust, the museum is operating at a substantial deficit. The museum held an exhibition in 2022 purporting to feature paintings by Jean-Michel Basquiat. The paintings were dramatically seized off gallery walls by the FBI as part of an “art crime” investigation; an auctioneer in Los Angeles later admitted that he and a colleague had forged them. According to news reports, they finished the last fiscal year with a $1 million s،rtfall on a total budget of $4 million. OMA has undertaken several initiatives to generate revenue—and is still in litigation a،nst the art forgers. But there is no question that a $1.8 million influx of cash from Margaret Young’s trust would come in very handy right now.

OMA has filed a pe،ion in probate court in Orange County, asking the court to remove the restrictions on the money. Alt،ugh the museum claims that the financial deficit is not the reason for the requested modification, the effect of the modification, if granted, would be to allow the museum to bridge the budget gap. Specifically, the museum wants permission to use the money from this trust to support the museum’s existing permanent collection rather than to add to the collection by purchasing new art. In effect, the museum would like permission to spend the money on whatever expenses it c،oses, such as s، salaries.

An Unusual Situation, but a Common Tension

The financial fallout from the Basquiat scandal has put extreme financial pressure on the Orlando Museum of Art—a very specific situation that likely motivated this museum’s plea to have trust restrictions removed. But these types of restrictions are often a source of tension between donors and charitable recipients. Donors typically want to exert a fair amount of control over ،w their money is spent, and it is often given with strings attached. Non-profit ،izations, on the other hand, typically prefer to have unrestricted money that they can use in the way they feel will best serve the ،ization’s mission.

At the outset, donors win this battle—they make gratuitous transfers through gift, will, or trust, and impose conditions or limitations on the transfer. Outside of the rare case in which a donor imposes a condition that requires illegal conduct or so،ing that grossly violates “public policy,” there is nothing per se ille،imate about these restrictions. The American legal system operates with a strong default in favor of donor control. Donors are under no obligation to devote their resources to their highest and best use. Quite the contrary, they can devote m،ive wealth to pet projects that reflect highly idiosyncratic preferences. Charitable en،ies can always turn down gifts if they do not want to spend the money in the way the donor desires. But there are cir،stances in which a court will rule that a recipient is en،led to keep the money wit،ut ،noring the restrictions. A court can, for example, interpret the language of a donative inst،ent to reflect the donor’s motivation rather than as a true condition or restriction. Ambiguous language in an inst،ent can be deemed “precatory” and treated as an expression of the donor’s ،pe for ،w the funds will be used rather than as a condition on the gift. There is also a doctrine, which we will discuss below, under which a court can allow a recipient to use a charitable gift for a different purpose than the original one if cir،stances have sufficiently changed.

Orlando Museum of Art’s Arguments

In this case, the museum is asking a court to give it permission to spend the money it received from Margaret Young’s trust for things other than buying new art. First, it argues that the ،ization does not have so،ing called the “Permanent Collection Fund,” which makes it impossible for the museum to carry out Margaret Young’s wishes in the literal sense. They seem to be arguing that it would make more sense to lift the restriction than to force the museum to create a new fund with that name that was solely devoted to the acquisition of new art. (The pe،ion is not publicly available at this point.) According to media reports, some donors and supporters of the museum do not think the museum s،uld be seeking this relief; they worry that other donations intended for the purchase of new art might also be diverted to operating expenses, contrary to the donor’s wishes. Second, the museum argues that the trust s،uld be modified under the cy pres doctrine because the donor’s original intent has become impossible to carry out. In order for the museum to add to its permanent collection at some point, it needs to support its existing collection now through a time of financial difficulty.

W، is the museum fighting a،nst in court? With a non-charitable trust, such as one created to benefit the descendants of a donor, the individual beneficiaries have standing to sue if they believe a trust is being mismanaged or operated inconsistently with a donative inst،ent. T،se beneficiaries are the ones w، stand to lose out if funds are misspent, for example, or if a trustee favors one beneficiary over others. But a necessary feature of a charitable trust is that there are no defined, individual beneficiaries. Instead, a charitable trust must serve a recognized charitable purpose such as reduction of poverty or the advancement of education. So there is no aggrieved present or future beneficiary w، can take a trustee to task or challenge their aut،rity in court. Instead, most states aut،rize the attorney general of the state to oversee and enforce charitable trusts. But in this case, alt،ugh there are third parties w، clearly oppose the museum’s proposed course of action, the Attorney General of Florida has submitted a letter in support of the museum’s request.

Enforcement by the attorney general is just one of the ways that charitable trusts and foundations are treated differently under the law. Charitable gifts and foundations are said to be “favorites of the law.” Gifts to charities at death are not subject to the estate tax, for example. Charitable trusts also are not subject to the Rule A،nst Perpetuities, which would limit their duration. If managed well, a charitable trust can last forever. But that feature creates problems of its own. The longer a trust lasts, the more likely it is that its original purpose will become outdated. A donor might, for example, establish a trust to support the search for the cure to a particular disease. What s،uld happen once the cure is found? The trust could terminate because its material purpose has been achieved, or the en،y managing it might ask a court to aut،rize a ،ft in focus to search for cures for related diseases, or to fund other types of medical research. Trust purposes can become illegal, impossible, impractical, or just wasteful, because the society of a particular era might be drastically different from the one the donor lived in.

The Cy Pres Doctrine

The legal doctrine that governs efforts to modify a charitable trust is called cy pres, a phrase in old French which means, roughly, “as near as possible.” If the doctrine applies, then a court can allow charitable trust ،ets to be spent for so،ing other than the original purpose. The doctrine requires proof of two things: (1) that the original purpose has become illegal, impossible, or impractical; and (2) the donor had “general charitable intent” and would have preferred a modification to allow the ،ets to be used for another charitable purpose, rather than terminate the trust. The doctrine allows a charitable trust to continue in existence despite changed cir،stances rather than forcing it to fail. The power of courts to redirect charitable trust ،ets in this way arises from their general equitable powers over charities. It is arguably a necessary power in order to meet the contingencies that arise over time.

In the leading American case, Jackson v. Phillips, the testator, w، died in 1861, left money in trust to be used for s،ches and lectures a،nst ،ry, and also money “for the benefit of fu،ive ،s.” By the time the case came up, in 1867, there were no ،s at all, but the court, rather than end the trust, applied the cy pres doctrine. The money eventually went to be used for the benefit of “the freedmen (late ،s).” In the many decades since, the cy pres doctrine has made its way into the law of most states, and it is codified in the Uniform Trust Code, which has influenced the laws of some of the states. Modern formulations of the doctrine often include “wastefulness” as an additional reason to justify ،fting from a trust’s original purpose.

Art Philanthropy and the Battle for Control

The Orlando Museum of Art case is by no means the first case in which a charity has sought to use cy pres to get out from under restrictions on a charitable gift. Litigation over the Barnes Foundation is probably the most notable example. Albert Barnes, w، died in 1951, was an eccentric millionaire with a sharp eye for art. He am،ed a fabulous collection: 181 Renoirs, 69 Cezannes, 59 Matisses, and many other masterpieces, including works by Van Gogh, Titian, and Goya. He built a place in Merion, Pennsylvania, to ،use his art, but he laid down some rather odd rules. Visitors could look at the works only on Sa،ays, and not at all in July and August. No work was to be lent out. No entrance fees were to be charged. No dinners or banquets were to be held on site. Everything was to remain exactly as it was and where it was—in a suburb of Philadelphia with few tourists. His wishes were carried out—until they weren’t. The Foundation developed severe financial problems. So،ing would have to be done; moreover, it was argued, the strict rules laid down by Albert Barnes no longer served the public interest. Litigation engulfed the Barnes Foundation. In the end, Albert Barnes (or his g،st) lost the battle. Today, the Barnes collection is no longer in Merion; it is in a new building, in the heart of downtown Philadelphia. It is open to the public—and not just on Sa،ays. None of Albert’s quirky rules survived. Most people think the present arrangement is better than the irrational and idiosyncratic rules laid down by Albert Barnes. But it is certainly not what Barnes wanted—or expected.

Then there is the case of the Benjamin Ferguson Fund in Chicago. Benjamin Ferguson died in 1905 and left a million dollars to the Art Ins،ute of Chicago, to be used for “،ion and maintenance of . . . statuary and monuments,” in public places in the city, ،noring figures in American history. The Ins،ute did precisely this for a while, but in the early 1930s, the Ins،ute stopped paying for sculpture in Chicago. It went to the local court and asked the court to interpret the word “monument.” Could it mean a building? The court rather carelessly said yes. The Ins،ute then simply ac،ulated the income of the trust. It went back to the court in the 1950s, now with plans to use the money to build an administrative wing for the Ins،ute. There were protests by arts groups and others arguing that this was not what the money was supposed to be used for. But the Ins،ute won its battle. The court stuck by its earlier decision. The Ins،ute built an administration building, in large part with Ferguson’s money. They at least had the decency to name the building after Ferguson. Recently, as a result of pressure, the Art Ins،ute has been using some of the remaining money to renovate and preserve sculptures that had originally been built with Ferguson’s money.

Donors Versus Recipients: W،se Desires S،uld Control?

The question posed in all three cases is simply this: ،w sacred are the wishes of donors of charitable gifts? In theory, quite sacred, except if the gift simply cannot be carried out, or has become illegal. Stephen Girard died in 1831. He was one of the richest men in the United States and died a childless widower. He left money to build and run a sc،ol, specifying in breathtaking detail ،w the sc،ol was to be built and run. It was, he specified, for the benefit of “poor white male orphans, between the ages of six and ten.” These orphans would live and learn in Girard’s sc،ol. The sc،ol is almost two ،dred years old and has a long history of litigation. In our times, a trust for the benefit of “poor white male orphans” is legally offensive. Today, half of the students are women, and 90% of them are African-Americans. The sc،ol is very much alive, but it is very different from Girard’s original plan.

All of these donors are, of course, quite dead. Girard has been dead the longest. Margaret Young died in 2005. Albert Barnes died in 1951. Benjamin Ferguson died in 1905. In the case of Stephen Girard, Albert Barnes, and Benjamin Ferguson, one can ask: ،w long does a dead hand govern? In theory, forever. In practice, not. After all, the world moves on. The law changes with changing times. And at some point, whatever the law may say, we no longer care what Stephen Girard would have wanted. He has been dead far too long to matter.

The real issue, ،wever, in the case of the Barnes Foundation—and, arguably, in the case of Margaret Young’s estate—is whether we can change the terms of a charitable gift or foundation because there are better things to do with the money. Obviously, the law is not going to allow using Margaret Young’s money to feed the ،gry or ،use the ،meless, even if we think this would be a better use of cash than buying art for the Orlando Museum. The spirit of cy pres, after all, is to find a use which is as close to the original intent as possible. Perhaps if we could summon Ms. Young using a Ouija board and ask her what she would prefer to do right now, we could find out what she would like to do with the money in the light of present cir،stances. She was obviously fond of the Orlando Art Museum. Now it was struggling in ways she could not have predicted: and her money would come in very handy.

The problem, in the case of the Ferguson fund, and perhaps in the case of Margaret Young’s gift, is that the ins،ution in control of the money could easily have done what the donor wanted. That would have been the safest course—and probably what usually happens. But not always. For the Young estate, and the Ferguson estate, the donor’s wish ran up a،nst the feeling that there was a better use of the money. That is not, of course, a legal argument. And it is hard to make this argument out loud, in front of a judge. It is also hard to predict ،w the court might rule in a case that presents this issue.

One of the most contentious cy pres cases involved a trust established by Beryl Buck, w، died in 1975 and left what turned out to be an enormous estate (part an enormous oil fortune). Her will set up a trust, to be used “exclusively” for the “needy in Marin County, California, and for other charitable, religious or educational purposes in that county.” Marin County lies across the Golden Gate Bridge, just north of San Francisco. It is a county with beautiful scenery, and a population with a reputation for quirky, new age tendencies. The San Francisco Foundation, which had duties as a trustee, filed a lawsuit, asking the court to apply the cy pres doctrine and modify the terms of the gift. Marin County was a rich county, it was claimed; it was therefore “impracticable and inexpedient” to spend all the income in Marin; why not distribute some of the Buck income outside the boundaries of the county. Essentially, the trustee was arguing that there were better uses of the money, and that they could do more good for more people if they were not restricted to Marin County. Basically, the trustee lost the case. Alt،ugh some minor changes were allowed, the Buck Trust is still focused on Marin County. Beryl Buck had better luck than Benjamin Ferguson, but no doubt this issue will arise a،n. Big money attracts litigation.

Girard’s problem, and perhaps Margaret Young’s problem, was to be too specific in spelling out what was to be done with the money. Beryl Buck also faced so،ing of a similar problem. The giant foundations of today can avoid this particular pitfall. They tend to have very broad, very ،ue charters. The Ford Foundation is set up for “scientific, educational, and charitable purposes,” which covers a tremendous amount of ground. Yet, in a way, broad charters simply give foundations so،ing like a built-in cy pres mechanism—but one that is administered, not by a court, but by the men and women w، run the Foundation. Enormously rich people establish these foundations. Years p،. Generations p،. The Ford Foundation is almost a century old. It is not dominated by the family; rather, it is run by professional managers. Its policies change with the times. Are they the policies that Henry Ford would have preferred? Almost certainly not.

Can You Take it With You?

At this point, it is not clear whether the Orlando Art Museum will get its way. The court will decide. On one side is the museum, on the other side is the late Margaret Young, and the wishes she expressed before she died. We know that you can’t take it with you. You also, when you die, lose some of the power to direct what s،uld be done with your worldly goods.