Recent Developments

Preserving
Charitable Intent:
The
famous Barnes Foundation has operated an incredible art museum in Merion, PA featuring
scores of Cezannes, Matisses and Renoirs. Unfortunately, due to severe
restrictions in the foundation’s trust indenture, this venerable institution
has been on the verge of bankruptcy. A plan was proposed to save the Barnes
Foundation if the court would release it from the requirement to operate in
Merion, and to invest its endowment solely in government securities. Two legal
theories were invoked, the deviation doctrine and cy-press. The deviation doctrine permits a variation from the terms
of a trust when circumstances, unforeseeable by the donor, are such that the
intent of the trust would be defeated absent the deviation.  If the court did not permit the Barnes
Foundation to deviate from the restriction on exhibiting art holdings outside
of Merion, PA the primary intent of the Barnes Foundation could be undermined. Cy-pres is a legal doctrine which provides that a
legal document, such as the trust in the instant case, should be interpreted to
carry out the intent of the parties as nearly as possible to the document, when
exact compliance would be impossible.  Some valuable lessons can be learned. Flexibility, caution,
and clear written donor agreements should be used when planning gifts.  Restricting investments based on current
conditions is never wise. Administrative and operating restrictions should
similarly be flexible to address changes in charitable purpose. If the donation
is to combat a particular disease, what if it is cured? What should the
donation be used for then? If the charity violates the parameters of the gift
should the agreement provide for a gift over to another charity? What mechanism
can be provided to modify and interpret the terms of the gift in future years
to keep it viable?