The Attorney General's Role in Charitable Trusts --Topic of ICBA Probate Section Meeting

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By Roberta M. Gubbins

Legal News

According to the large group of probate and estate planning attorneys meeting at the Michael Franck building on April 19th about ten to fifteen percent of their clients want to provide for their favorite charity in their estate planning. They can accomplish this with a charitable trust.

Tracy A. Sonneborn, Assistant Attorney General, Charitable Trust Section, assisted by Stephen Brey, of Bernick, Omer, Radmer & Ouellette, spoke on the role of the Attorney General's office in the administration of charitable trusts. "I am the only attorney in that section and am available until May when I will retire."

"A particular sort of gift in a will or a trust must be registered with the Attorney General's office," he said.

"We administer a number of statutes, but the two main ones are that we register Charitable Trusts--any charity holding assets in Michigan for a charitable purpose must be registered and report to our office every year. That is independent of whether the charity is still soliciting funds. We get notice of probate estates with charitable remainders or that create charitable trusts."

"A charitable remainder is a remainder or residuary interest given to a trustee. If you have a will that leaves ten percent to the American Cancer Society, we need to have notice. Send us:

* The will

* The attorney fee agreement

* All the papers filed in the probate proceeding including the inventory and

* The final account before the estate is closed.

"When we get the documents," he said, "we review them to determine if this is the type of gift that requires our office to be given notice. If the gift is a residuary interest, we get notice. Specific gifts can be residuary if, for example, the gift is for 2M and there is only 1M left meaning that portion will have to be divided pro rata."

"In those cases, we watch expenses, settlement claims and sales of unique assets to make sure the remainder interest is not improperly diminished. And yes, a remainder bequest to a church, which is not required to register, must be registered until the gift is made."

"When we have a will with a residuary charitable gift, we look at the size of the gift and particularly wills that list a number of gifts creating a situation where each gets 1/17th of the gift."

Sonneborn noted the attorney general reviews such wills more closely since the charities will probably not hire an attorney to challenge such a small gift. They also are involved when there are claims on undue influence.

If you have a charitable trust and there is any proceeding contemplated or initiated, we should receive notice. If it is termination not in accordance with the trust, a modification or a petition for instruction, we should get notice. Under the statute the attorney general can petition to set aside a decision made without notice to the attorney general.

The AG registers charitable trusts and soliciting trusts. "If you have a client that is a charity and is soliciting money in Michigan, it needs to register with us and provide financial disclosures before they will be able to solicit charitable contributions."

"We sort-of do cradle to grave," Sonneborn said. "When a charitable trust is created and receives its first dollar or a charitable trust terminates and seeks to dissolve," they are required to notify the AG's office. This is also true in cases where the charity is dissolved through inaction and still has funds.

The Uniform Prudent Management of Institutional Funds Act, MCL 451.921 et seq allows the Board of a College, for example, to dip into the principal of a fund if it does so prudently. It also allows for community trusts where many small trusts can be combined into one big pot, he noted.

"If you are making a gift to a large institution and you want to be sure that purpose is carried out, you should first look at this statute, then decide what you can do to make the corpus uninvadeable. On the other hand," Sonneborn said, "most donors would like to give the institution the flexibility to spend it in a reasonable way."

Sonneborn discussed the types of litigation that can involve the AGs office. "There are a number of cases that involve gifts to a municipality" which involves the 'Gifts, grants and devises Act of 1915.' This main purpose of this act was to remove charities from the Rule against Perpetuities and gives the AG the obligation to go into court to protect the expressed interest and intentions of charitable donors."

"The item most likely to be of interest," he said, "is that the registration threshold for all-volunteer organizations has been raised from $8,000 to $25,000 in charitable contributions (annually)."

Sonneborn included some useful links, which include:

1. Link to the Attorney General's Charities home page:

www.michigan.gov/agcharities

2. Link to our searchable database of registered charities and public safety organizations, and licensed professional fundraisers: www.michigan.gov/

agcharitysearch

3. Procedures and Requirements, http://michigan. gov/ ag/0,1607,7-164-17334_18095-45037--,00.html

3. Short summary of recent changes to Michigan's Charitable Organizations and Solicitations Act:, http://michigan. gov/ag/ 0,1607,7-164-17334_ 18095-250403--,00.html

Tracy Sonneborn did his undergraduate work at Michigan State University and graduated from University of Michigan School of Law. He clerked for Justice Brickley at the Michigan Supreme Court, and was appointed to his position as Assistant Attorney General in 1992.

The next meeting of the Probate Section is at noon at the Michael Franck building on May 17th. Amy Tripp will discuss benefits for Veterans.

Published: Mon, May 2, 2011

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