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Charitable Trust Modification

In matters involving the administration and modification of charitable trusts, Saul Ewing fully understands the significant tension between respecting donor intent and the importance of public interest and charitable efficiency. Whether confronted with a charitable trust that is no longer productive or that no longer functions as intended, Saul Ewing has assisted clients in instances ranging from significant depletion (or negative performance) of trust assets, to changes in tax laws, to impracticable trust terms and unanticipated circumstances that impair execution of the trust’s intended purpose.

Saul Ewing has broad experience addressing such issues, including:

  • counseling clients on the modification and reformation of charitable trusts and endowments;
  • cy pres matters in which modification of charitable gifts and trusts is sought to better address public needs; and
  • administrative deviation matters aimed at modifying specific charitable trust provisions when those provisions frustrate the general intent or purposes of the donor and the effective administration of the trust.

In handling these and other like matters, Saul Ewing frequently navigates and works with the Pennsylvania Office of Attorney General on behalf of our clients. In addition, we have extensive state and federal regulatory experience, which enables us to effectively deal with the specific regulatory framework facing charitable trusts and nonprofit organizations in these types of matters.

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Experience

  • As counsel to the John G. Johnson Trust for well over a century, Saul Ewing has over many years assisted with several modifications to the trust which relate to the world famous art collection assembled by the late John G. Johnson, one of the most prominent lawyers of the late 19th century and an avid art collector. In fact, attorneys who practiced under Mr. Johnson continued to work together after his death in the early 20th century and, in 1921, formed the basis of what has evolved to become the present-day Saul Ewing. Mr. Johnson’s last will and testament bequeathed his art collection to the citizens of Philadelphia but with a mandate that it remain on display in his mansion on Broad Street in Philadelphia. In our capacity as counsel, Saul Ewing petitioned what was then known as the Orphans Court of Philadelphia County to modify his charitable trust on grounds that his mansion on Broad Street was no longer a secure location to house his extensive collection, primarily because the mansion was not properly fireproofed and was in increasingly poor condition. This situation, along with a number of other unexpected and intervening factors, led the Court to permit an administrative deviation from Johnson’s initial restrictions for purposes of the permanent transfer of the art to the Philadelphia Museum of Art (“Art Museum”), where it resides to this day. In a more recent case, Saul Ewing obtained court approval to modify the very restrictive investment limitations set forth in Johnson’s will. Many have argued that the Court’s decision in the Johnson case to move Johnson’s collection to the Art Museum helped set the stage for the Montgomery County Orphans’ Court’s decision to approve the move of the Barnes Foundation’s collection from Merion, Pennsylvania to Philadelphia, Pennsylvania.
  • As counsel to the Trustees of the University of Pennsylvania, (the “University”), Saul Ewing helped the University secure distribution of nearly $15 million from a trust under the will of alumus Henry P. Erdman (class of 1904 and law school class of 1907). This gift was contingent on the University moving either its main campus or one of its colleges or departments to Valley Forge, Pennsylvania and erecting at least one building there in his memory. In our capacity as counsel, Saul Ewing responded to a Petition for Adjudication/Statement of Proposed Distribution and Notice of Charitable Gift filed by the surviving trustee, Wachovia Bank (“Wachovia”), in the Orphans’ Court Division of the Philadelphia Court of Common Pleas in March 2008 with a proposal to construct a facility for the education of medical students near Valley Forge. Both Wachovia and the Pennsylvania Office of Attorney General, as parens patriae for charitable interests approved this proposal and, today, Mr. Erdman’s legacy is embodied in the Henry P. Erdman Center in the heart of the facility now known as PennMedicine Valley Forge.
  • As counsel to the Thomson Foundation, Saul Ewing assisted with modifications that ultimately broadened the class of beneficiaries to a 135-year old charitable trust valued at $14 million. This trust was originally established to provide income for “the education and maintenance of female orphans of railway employees whose fathers have been killed while in the discharge of their duties.” With increased safety there have been fewer railroad deaths; therefore, Saul Ewing successfully petitioned the Orphans’ Court Division of the Philadelphia Court of Common Pleas to expand the class of permissible beneficiaries entitled to benefit from the trust to include sons and other qualified relatives of the deceased railroad employees as beneficiaries of the trust. The firm also successfully sought court approval to modify the terms of the trust to allow the trustees to consider more than just the initial railway systems originally contemplated by the grantor. Our firm worked closely with the Pennsylvania Office of Attorney General in seeking these modifications.
  • As counsel to the Elmer Deaver Fund, Saul Ewing has assisted with modifications to the distribution methods of a charitable trust that was established to provide scholarships for the descendants of employees of the settlor’s insurance company. Special relief was also provided in the trust for individuals of African-American descent who reside in the Philadelphia area. Due to changing circumstances and the disappearance of some entities through which the settlor’s charitable intent was ultimately implemented, Saul Ewing obtained from the Orphans’ Court Division of the Philadelphia Court of Common Pleas approval for several modifications to the trust. Saul Ewing is also in the process of preparing a report to the Court on the practical results of these changes and will seek approval of such changes from the IRS to ensure the continued qualified status of the fund.

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Amanda K. DiChello
Richard T. Frazier
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