Hurley Burish and Stanton, SC Attorneys at law

What happens when a charity named in my estate plan goes defunct?

Attorney Thomas Vercauteren
Phone: 608-257-0945

Recently, Dane County decided to end its partnership with the Henry Vilas Zoological Society, the nonprofit entity that supported the Vilas Zoo.  The county cited concerns regarding the large cash reserves that the nonprofit held and the accessibility of funds raised with the intention to support the zoo.

Perhaps overlooked in the consequences of the termination of this partnership is the number of individuals that have named the Zoological Society as a beneficiary under their estate plan.

So what happens if a nonprofit has undergone a transformation in its charitable purpose, is in the midst of reorganizing under bankruptcy, or dissolves?

The answer, of course, is the lawyerly: “it depends.”

Wisconsin Statute 701.0413 codifies what’s known as the “cy pres doctrine” for trusts. Cy pres in this context represents a French legal term that roughly translates to “as near as possible”.  The intention of the cy pres doctrine is to give power to the courts to make charitable gifts more effective.  The statute specifically provides that the “court shall liberally apply the doctrine.”  While this particular statute only applies to trusts, Wisconsin has long recognized in common law the applicability of the cy pres doctrine to wills.

The statute permits the court to look into the settlor’s charitable purposes for making such a bequest. If the court finds that such purposes are unlawful, impracticable, impossible to achieve, or wasteful, the court can modify a settlor’s trust in a manner consistent the settlor’s charitable purposes.

Practically, this means that a court can decide whether there is a suitable replacement for the charity you named in your estate plan.  The statute directs the court to look at a number of factors, including:

  1. The current and future community needs in the general field of charity in which the original charitable purpose falls;
  2. Other charitable interest of the settlor;
  3. The amount made available to charity; and
  4. Any other relevant factors.

Therefore, if a decedent did not update their estate plan and named the Henry Vilas Zoological Society as a beneficiary, the court may find that the charitable purpose behind such a bequest was now impossible to achieve.  The court could then substitute its own judgment for that of the decedent and attempt to find a nonprofit that is close to the purposes of the society.  The court could even find that the community needs for supporting the zoo are being met and instead add to other recipients of bequests under your estate plan.

The amount of uncertainty in relying on the cy pres doctrine is typically something we advise our clients to avoid.  A big part of having a complete estate plan is the assurance that your estate will be distributed to the organizations and individuals you have chosen after giving careful thought.

This is one reason why it is important to review your estate planning documents every few years.  If circumstances have changed, an amendment to your plan may be necessary to achieve your estate planning goals.  Otherwise, you may risk a court substituting its judgment for your own.  We are happy and available to discuss your options and tailor an estate plan that is airtight and right for you.