Written records are the basic materials of historians. Unfortunately, no records of charitable giving by Native American populations before European settlement have survived. Little is known about the settlers at Roanoke, North Carolina in the 1580’s.
America’s earliest immigrants continued a long tradition of providing a bequest to charity: four Mayflower Pilgrims made gifts to their churches through their written wills in the 1600’s.
Mary Chilton Winslow, one of the first of the Pilgrims to step ashore at Plymouth, Massachusetts in 1620, left a bequest to her church through her will. Born in England, and just 13 years of age when her feet splashed down in the New World, Mary lived a full life, gave birth to ten children, and died in 1679. Among her descendants is the late President George Herbert Walker Bush.
One of the earliest American charitable bequests was in the year 1621, when Reverend Thomas Bargrave bequeathed his library to a proposed college in Virginia. If we were celebrating Bargrave College as America’s first, his bequest might be famous today. But in 1622, the gentleman sent from England to be superintendent of the college was killed by Powhatan Indians. Plans were put on hold until 1693, when a charter was granted to The College of William and Mary, colonial America’s second college. The fate of Bargrave’s library is unknown.
The first college in the American colonies, and one of our earliest nonprofit organizations, is Harvard College, founded in 1636. John Harvard, an Englishman educated at Cambridge, emigrated with his wife Ann to Massachusetts in 1637 at age 29 and died the next year. In addition to his library of 400 volumes, John Harvard bequeathed about 800 pounds to the college – very large gifts for the time. Grateful trustees renamed the college in honor of his bequest.
As America’s only college for 57 years, Harvard documented early examples of many planned gifts. Harvard was a beneficiary in the will of Robert Keayne, a Boston merchant, whose Apologia, written in 1653, occupies 158 pages in the probate records. Keayne bequeathed substantial gifts to the Boston community: a conduit to combat fires; a town house with a market and library; an artillery range, and “two heifers or cows to the captain and officers of the First Artillery Company to be kept as a stock constantly and the increase or profit of these cows yearly to be laid out in powder or bullets, etc., for the use and exercise of the great artillery”; 50 pounds for a school “to help with the training up of some poor men’s children of Boston (that are most towardly and hopeful) in the knowledge of God and of learning”; 50 pounds “for the use and relief of the poor members of our own church or to any other good use that shall be accounted as necessary.”
Keayne, who felt unfairly accused of profiteering at the expense of his neighbors, added a caveat: “if the town of Boston shall slight or undervalue this gift or my good will to them therein and shall refuse or neglect to go about and finish these several buildings” his bequest will go instead “to the sole use of the College at Cambridge.” To ensure a benefit for Harvard College, he added that if Boston observed the conditions of his bequests for public works (it did), his estate provided an annuity of 20 pounds per year to Harvard “for the best good of the scholars.” His annuity payments to the college were realized.
Harvard College encouraged bequests from the time of its founding. Between 1636-1712, bequests provided about three times as much money for Harvard as did gifts from living individuals.
All American colleges from 1636 to our independence depended on bequests. Princeton University’s charter in 1746 included the power “to receive legacies and bequests of any kind whatsoever.” When the founders drafted the charter, they knew that a sizeable bequest for a new college to be located in New Jersey had been pledged in 1745 in the will of James Alexander, a leading New Jersey power broker and attorney.
Alexander’s public commitment to a bequest was very important to the founding of Princeton (originally known as The College of New Jersey). It provided the founders with confidence in their project; it gave credibility to the proposed college; and it helped to attract other donors.
The first bequest received by Princeton was recorded in the Trustee minutes on September 27, 1749: five pounds from the estate of Evan Revis. A very large bequest to Princeton in the amount of 700 pounds from William Kings of Delaware was reported in the Boston Gazette on April 24, 1750.
Another bequest donor is more famous. The bequest to Princeton from Jonathan Belcher, the Provincial Governor of New Jersey and President of the college’s Board of Trustees, may be well-known, but not many people are aware of the complex arrangements for his gift.
Belcher pledged his book collection, a number of paintings, and his “terrestrial globes” to the college. His gifts were arranged through a formal legal contract, recorded in the Trustee’s minutes of May 8, 1755. Governor Belcher received consideration of ten shillings from the College for his pledge, “reserving for myself nevertheless the Possession & Use of all the aforegoing Premises during my natural life.”
This is a good example of the sophistication of gift arrangements available to donors in America’s colonial era.
Governor Belcher’s legally-binding pledge of a bequest, made during the fund raising campaign to build the College campus, inspired the Trustees to offer to name its main campus building “Belcher Hall.”
As a member of the Harvard Class of 1699, Belcher was mindful of John Harvard’s bequest, which named that college more than a century earlier. But the Governor modestly refused the Trustees’ offer, and suggested the building be named Nassau Hall in honor of King William the Third of the House of Nassau.
The College took possession of Belcher’s gifts after the Governor’s death in 1757, at which time Princeton received the globes, paintings, and 474 books, making the college library one of the largest in the American colonies.
Rev. Samuel Blair, Jr. graduated with the Princeton Class of 1761, then was hired as a tutor. Blair wrote a fund raising pamphlet entitled An Account of the College of New-Jersey which was published in 1764.
In it he mentioned a bequest in the works from the estate of Colonel Alford of Massachusetts that could be as much as 500 pounds. At the time, the annual cost for a Princeton student’s tuition, fees, room, board, and other expenses was just over 25 pounds.
Blair included this sample language for a bequest to Princeton:
I do hereby give and bequeath the Sum of [X dollars] unto the Trustees of the College of New-Jersey, commonly called Nassau Hall.
Throughout U.S. history, bequests have provided more financial support for nonprofit charitable organizations than all other gifts through trusts, annuities, and complex assets combined. Bequests made possible the Smithsonian Museum, the Pulitzer Prize, hospitals, homeless shelters, wildlife refuges, schools, colleges, churches, synagogues, and other nonprofits. According to Giving USA, charitable bequests provided $39.7 billion in 2018. Charitable remainder trusts, gift annuities, lead trusts, and gifts of complex assets provided $8-10 billion that year.
In settings very different from their many countries of origin, donors in the thirteen British-run colonies in America found innovative ways to make gifts using financial contracts, real estate, crops, livestock, books, artworks, and other tangible property.
Samuel Fuller, 39 years old upon landing in Plymouth, a signer of the Mayflower Compact, and a self-taught surgeon who served as the only physician for the colony, made his will on July 30, 1633 and died a month or so later. Fuller bequeathed a future interest in livestock: “the first Cow calfe that my Browne Cow shall have to the Church of God at Plymouth.”
In 1650, Boston merchant John Newgate gave Harvard a permanent annuity of five pounds a year through a complicated financial contract. The annuity was payable by Newgate during his life, and by a farm lease after his passing. In 1670, London merchant William Pennoyer left a much larger gift through his will: annuity payments of 34 pounds from a farm lease.
Payments to the college began after the death of Pennoyer’s wife in 1678. Harvard capitalized the annuities given by Newgate, Pennoyer, Robert Keayne, and another donor, and recorded their income streams as an investment asset on its balance sheet in 1672.
People give what they own. With help from charitable gift planners, today’s donors give publicly-traded and closely-held stocks, bonds, LLCs and other corporate interests, retirement accounts, and cryptocurrencies. Making gifts of complex noncash assets is part of a long tradition that can be facilitated in recent years through national donor-advised funds, community foundations, and specialized firms. For example, in 2018, 47% of contributions through the donor-advised fund called Fidelity Charitable were made in the form of publicly traded securities (stocks, bonds and mutual funds), and 16% ($1.3 billion) were non-publicly traded assets (private stock, restricted stock, limited partnership interests and cryptocurrency).
Soon after winning independence and ratifying a new U.S. Constitution, many states banned the use of charitable trusts. What was going on?
The answer is an important chapter in the thousand-year history of charitable trusts.
Eager to set aside ancient English precedents in favor of modern laws applicable to the American people,1 newly-empowered legislators revoked many laws, including the Statute of Charitable Uses, enacted two centuries earlier by Parliament. (In modern law, what was called a “use” we now call a trust.)
Why was the statute unacceptable? One reason is that the statute specifically authorized the Church of England to act on behalf of the kingdom by supervising and regulating charitable trustees.2 The statute could not be amended by simply substituting an American equivalent for England’s official state church. Freedom of religion, including freedom from regulation by any particular church, was enshrined in the first amendment to the Constitution: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”
Policymakers assumed the 1601 statute provided the sole legal authority to create charitable trusts, so they believed that revoking the statute meant charitable trusts were no longer valid under the laws of their states. That position was upheld by the U.S. Supreme Court in 1819 in a decision written by Chief Justice John Marshall.3
Legal support for charitable trusts in the United States was at a crossroads. A better understanding of history changed the course of state and federal policies.
In 1818, British legal historians began to uncover overwhelming evidence that charitable trusts predated the Statute of Charitable Uses by hundreds of years. The statute was not the original authority for people creating charitable trusts.
Pointing to historical evidence first published in the U.S. in 1827,4 a U.S. circuit court of appeals decision in Magill v. Brown (1833)5 found that charitable trusts preceded the 1601 statute. In 1844 the U.S. Supreme Court agreed in Vidal v. Girard’s Executors that the American law of charitable trusts was grounded in the long experience of trust donors and the precedents of common law. The court ruled that charitable trusts were valid even in states that had revoked the English statute, although New York imposed other restrictions.6
History may not always repeat itself, but sometimes it rhymes. In this 50th anniversary year of the Tax Reform Act of 1969, a few people have asserted that charitable gift planning began with the 1969 legislation, which “created charitable remainder trusts.” American policymakers must not act on a false assumption that can be corrected easily by historical information. Like the Statute of Charitable Uses, the 1969 Act was intended to prevent well-known abuses of trust arrangements. [See my article on The 50th Anniversary of the Tax Reform Act of 1969]
Here is a selection of highlights from the thousand-year history of charitable trusts.
The Early History of Charitable Trusts and Trust-Like Gifts
The idea of creating trusts to realize personal and charitable objectives has deep international roots. Arrangements for holding and administering property “either for the benefit of someone else or to further some particular purpose,”7 including charitable purposes, were available in medieval European countries before the year 1000.
Compiling evidence about the history of trusts is a relatively recent activity. Today there are substantial reference works devoted to the law of trusts, but the concept of “trusts” as the subject of a unified body of law began in the 1800s.8 People used trusts and related arrangements for many centuries before scholars developed a systematic legal framework that enabled rigorous research.
There is a growing consensus that, while Roman law did not recognize a trust, Roman concepts provided essential elements in the development of charitable trusts in Europe. Familiar modern words such as annuity, beneficiary, charity, donation, eleemosynary, executor, fiduciary, residuum, and testament have Latin roots.
An important trust-like arrangement called a usufruct was authorized under Roman law. The use of property (usually land) could be transferred temporarily to another person, who enjoyed beneficial use of the property (its “fruits”) without the right to change or sell the property itself. The person receiving the right to use land could grow and sell crops or maintain livestock, for example. After a period of years or the death of the beneficiary, the usufruct would end, and use of the land would revert to the property owner.
The medieval church adapted the Roman concept of usufruct for charitable purposes. One of the most important and influential examples of gifts that involve payments back to a donor for life with a surplus amount (residuum) for charitable purposes dates to the sixth century. Life-income gifts were encouraged in the rules of the monastic communities founded by Saint Benedict of Nursia (480–543). Benedictine monks encouraged wealthy parents to help prepare their sons and daughters for entering religious communities by giving property to the church rather than to their children.
While the monks preferred gifts with no strings attached, they acknowledged that some parents were unable or unwilling to make valuable gifts unless they received an assurance of cash payments from the religious community. Benedict’s Rule 59 encouraged parents to make gifts in exchange for lifelong income:
[if parents] wish to gain merit by offering some alms to the monastery, they may make a formal donation of the property they want to give to the monastery. If they wish, they may reserve the income for themselves.
Benedict’s Latin sentence ends in a very important word:
Vel certe si hoc facere noluerint et aliquid offerre volunt in eleemosynam monasterio donationem, reservato sibi, si ita voluerint, usufructu. [my emphasis]9
This is a mirror image of the original Roman idea of a usufruct, since ownership of the property itself was transferred to the Benedictines, and the income generated by the property (its fruits) was retained by the donors during their lives. Though the transferred property was owned by the Benedictines and not held in trust, there is a fiduciary relationship that is not distant from a trustee.
The idea of making life-income gifts to Benedictine communities through modified Roman usufructs spread throughout the Mediterranean world in the 6th century. The Rule of St. Benedict, including its encouragement of life-income gifts, remains in wide use today.
An Islamic charitable endowment called a waqf was documented in the year 876. Some scholars speculate that the waqf may have influenced English trusts. For more information see notes below.10
Pioneering legal historians Sir Frederick Pollock and Frederic William Maitland traced the practice of giving land to a clergyman “for the use of the church” to an ancient period “far before the Norman Conquest” in 1066.11 As early as the year 825, Maitland “found evidence of conveyances to bishops to the use of churches and monasteries.”12
During the Crusades (1095-1291), an English warrior might travel to distant countries and convey title to a trusted friend to safeguard the ownership of land, buildings, and other property, while providing support for the warrior’s wife and children until his return. Devout, wealthy donors could entrust gifts of land or money to a fiduciary with the power to direct income or principal to a religious institution’s chapel, library, or hospital. Trusts were enforceable under the church’s Canon Law, and later in Chancery Court.13
Charitable Trusts were Popularized by Franciscans in the 1200s
The earliest large-scale application of a recognizable trust arrangement came about through Franciscan missionaries. Fifteen years after the founding of their order in Italy by St. Francis of Assisi, nine Franciscan friars arrived in Dover, England, on September 10, 1224. Barefooted, they walked 16 miles to the city of Canterbury. Sympathetic donors wished to provide the friars with living quarters, a chapel, and land for farming, but strict Franciscan vows of poverty were a challenge, as described by Frederic Maitland:
The rule of their order prescribes the most perfect poverty: they are not to have any wealth at all. They differ from monks. The individual monks can own nothing, but a community of monks, an abbey, a priory, may own land and will often be very rich. On the other hand, friars’ priories are not to have property either individually or collectively. Still, despite this high ideal, it becomes plain that they must have at least some dormitory to sleep in. They have come as missionaries to the towns. The device is adopted of having land conveyed to the borough community to the use of the friars . . . Very soon in various towns in England a good deal of land is held thus.14
The creative use of trusts for the Franciscans was widely imitated. In 1225 a wealthy London merchant arranged for Franciscans in London to use land. A house was constructed, for which King Henry III sent timber from Windsor forest. Another contingent of Franciscans moved to the university town of Oxford, where they received a house and garden. All these properties were owned by trusts managed by cities for the use of the friars.
Between 1225-1230 at least 13 Franciscan communities were founded under similar trust arrangements in places such as Bristol, Cambridge, Lincoln, Salisbury, and York. For the next several hundred years, while maintaining their vows of poverty, the Franciscans received gifts through charitable trusts. These gifts were most often given by subscription (annual pledge payments) by living donors. Substantial trust additions came through bequests.
The Black Plague and the effects of poverty diminished the population of the Franciscans in England. By the time of the Dissolution of the monasteries in 1538 and the dismissal of the friars, all that remained of value in their trusts was the use of real estate, which was soon redirected to other purposes.
Charitable Trust Discoveries and the Statute of Charitable Uses (1601)
Trusts for the benefit of the church or for the poor were known as charitable “uses”: title was held in a trust, while the fruits of the trust property were used by a beneficiary. In modern law, what was called a use we now call a trust.
Trusts became quite popular in France and England during the Renaissance. By the time of Shakespeare and Queen Elizabeth, English donors had created thousands of charitable trusts.
The extent of these trusts was documented in a massive research project begun in 1818, when a commission was charged with recording the history, development, donors, purposes, and assets of the country’s existing charitable trusts:
It was in the nineteenth century, however, that the first detailed general surveys of English and Welsh charities were made. In August 1818, amidst revived interest in the more effective utilization of charitable funds, the Brougham Commission was appointed by parliament to examine the state of charitable trusts for educational purposes in England. With the renewal and widening of its powers in the following year, it spent almost two decades investigating charitable trusts of all types in England and Wales … The establishment of charitable trusts, gifts or bequests made in perpetuity for specified charitable purposes, was common in England and Wales between the sixteenth and nineteenth centuries, and the Brougham Commission’s completed survey listed nearly 29,000.
Though their existence is well known, less generally appreciated is the wide range of their trustees’ activities and in particular the importance they assumed in the life of certain towns, especially during the eighteenth and nineteenth centuries. Most familiar amongst their functions is the extensive relief of poverty: many maintained almshouses and workhouses or relieved the needy by gifts in cash, clothing, blankets, fuel and bread; or by pensions and interest-free loans. Also manifest is the provision and maintenance of educational institutions such as grammar and charity schools, and the finance of schemes for apprenticing pauper children. Yet beyond these lay many other activities …15
Records for many of the charitable trusts created before the 1500s had long since disappeared by the 1800s, but much evidence remained. The folio-sized reports on 29,000 charitable trusts compiled by the Brougham Commission researchers filled 32 large volumes.
There were so many charitable trusts in England in the 1500s, and so many clear abuses of them, that an influential Statute of Charitable Uses was enacted by Parliament in 1601 to prevent self-dealing. The Preamble to the statute listed many of the purposes that promote the general welfare. The body of the statute provided a review process to prevent the unacceptable use of trust assets for personal benefits.
Here are the first three paragraphs:
The Statute of Charitable Uses: An Act to Redress the Misemployment of Lands, Goods, Stocks, and Money Heretofore Given to Charitable Uses
Whereas lands, tenements, rents, annuities, profits, inheritances, goods, chattels, money, and stocks of money have been heretofore given limited appointed and assigned, as well by the Queen’s most excellent majesty and her noble progenitors, as by sundry other well disposed persons.
Some for relief of aged, impotent, and poor people, some for maintenance of sick and maimed soldiers and marines, schools of learning, free schools, and scholars in universities, some for repair of bridges, ports, havens, causeways, churches, seabanks, and highways, some for education and preferment of orphans, some for or towards relief stock or maintenance for houses of correction, some for marriages of poor maids, some for support, aid and help of young tradesmen, handicraftsmen, and persons decayed, and others for relief or redemption of prisoners or captives, and for aid or ease of any poor inhabitant concerning payment of Fifteens [a tax], setting out of soldiers and other taxes.
Which lands, tenements, rents, annuities, profits, inheritances, goods, chattels, money, and stocks of money nevertheless have not been employed according to the charitable intents of the givers and founders thereof, by reason of fraudulent breeches of trust and negligence in those that should pay, deliver, and employ the same.16
After listing approved activities (such as “relief of aged, impotent and poor people”) that became defined as charitable purposes in the laws of Great Britain and the United States, the Preamble pointed out typical abuses by trustees, observing that some charitable trust assets:
… have not been employed according to the charitable intent of the givers and founders thereof, by reason of frauds, breaches of trust, and negligence in those that should pay, deliver and employ the same.
W.K. Jordan noted that the Statute gave donors confidence in the legal foundations of their gift arrangements, and that gifts would be used as donors intended:
The great Elizabethan statute of charitable trusts was notable, then, not because it created charitable uses, but rather because it codified a body of law badly wanting classical statement and because it vastly stimulated constructive and well considered charitable giving by lending full and most formidable protection to the aspirations of donors.17
Note also the range of financial and noncash assets given through trusts: “lands, tenements, rents, annuities, profits, inheritances, goods, chattels, money, and stocks of money.” People in British-run American colonies brought with them a tradition of giving whatever they owned. Like today, most family wealth was not held in the form of cash. [See my article Surprisingly Complex Non-Cash Gifts.]
Historian Joseph Smith recorded an early American trust (though not a trust with a charitable purpose) created in 1641 in western Massachusetts by “the widdow Horton” to provide trust income and principal for the support and education of her two sons. By arranging a trust, Ms. Horton controlled the use of her property after her wedding to benefit her sons by a prior marriage.19
While the purpose of the Elizabethan statute in 1601 was to reform longstanding practices, its intent was obscured over two centuries. After 1800, the meaning of the statute was misunderstood by American jurists and legislators, who assumed that the legal authority for creating charitable trusts had been provided by the statute, rather than by the long experience of donors and precedents embodied in common law.
As recounted in the Introduction of this article, it took 50 years for historical proof to change the course of the American law of charitable trusts. In its 1844 decision Vidal v. Girard’s Executors the U.S. Supreme Court acknowledged that legal historians working with the Brougham Commission had uncovered documentation for many charitable trusts that predated the 1601 statute. The court ruled that charitable trusts were valid under common law in the U.S., even in states that had revoked the Statute of Charitable Uses.
Research Needed on Early American Charitable Remainder Trusts
Until the Tax Reform Act of 1969 compelled the use of unitrust and annuity trust forms of payments, charitable remainder trusts in the U.S. were called life income trusts, because the trusts paid out the actual income earned by the trust principal.
For example, in 1779 Eleazar Wheelock, founder and first president of Dartmouth College, included a life income trust in his will to provide income to his wife and son. He directed that the trust remainder should endow a fund to support the college president or a professor:
I have disposed of for that purpose to the amount of upwards of a thousand pounds lawful money, fifty pounds of the interest of which I devote as above said to the support of my said son Ralph as above said, the rest of said interest whatever it may be, I give to be improved towards the support of his mother during her life as long as she shall have occasion for it for her own support, and when they, my said wife and my said son Ralph shall be by any means either by death or any favourable circumstances in life in no necessity thereof for their support, I give and bequeath the whole debt, that now is or shall be due to me from the school both principal and interest at my decease to the only use and benefit of said school forever to be improved at the discretion and by the direction of the honourable corporation towards the support of the President or a professor as they shall judge most necessary or convenient.20
Life income trusts were administered by banks or trust firms whose charter empowered them to do so until 1828, when the Chancery Court of New York State approved a life income trust created in the will of Nicholas Anderson to be administered by St. George’s Episcopal Church, incorporated in lower Manhattan.21
Anderson bequeathed $4,000 in trust for the church to invest and to pay the income to his housekeeper for her life, with the remainder to become an endowed fund of the church. The church invested the trust principal in municipal bonds and mortgages that paid the housekeeper the trust income of “at least 6% per year.”
Lawrence Friedman discusses a charitable life income trust contest in the case of Harvard College v. Amory (1830),22 in which the Supreme Court of Massachusetts approved the “prudent investor” rule that allows trustees freedom in investing trust assets as “men of prudence, discretion and intelligence manage their own affairs.” Friedman observed that this case encouraged the rise of private, professional trustees, but does not comment on the fact that the donor’s wife received payments from the trust during her life, with the remainder distributed to Harvard and Massachusetts General Hospital.
The American Bible Society has documented several life income trusts created in the mid-1800s. Aware of the historical importance of these gifts, in 1964, Eric M. North, general secretary of the American Bible Society, wrote an account of its “Annuity and Trust Agreements” from 1831 to 1848. He and his staff combed through minutes, reports, and financial records to document the gifts as meticulously as possible. Many of the records had already been lost.23
The common practice of adding a trust power that provides a person with income for life or a number of years, with the remainder going towards a charitable purpose, has been explored in great detail by modern writers, but was unremarkable to American legal historians until the 20th century.
For example, the sole reason that an influential reference book on trust law published in 1862 gave two examples of trusts that provided life income to surviving family members was to analyze a contest over the trust remainders.24 A 938-page text on trust law published in 1872 does not mention life income provisions with a charitable remainder.25
This gap in documentation for the history of charitable life income trusts before the 20th century is challenging. It would be reasonable to assume that early American settlers created charitable trusts as their ancestors had done in their countries of origin. Evidence of charitable trusts from 1600-1800 is missing. In particular, life income powers are mentioned in 19th century texts discussing charitable trusts (such as in the Anderson and Hart trust cases cited above), but trust agreements are rarely published.
In my experience, law firms and banks that created or administered personal charitable trusts before 1900 have not preserved those trust agreements in their archives, whether to protect the privacy of clients or simply to reduce the volume of paper files relating to terminated trusts. I am not aware of a systematic effort to search the archives of American nonprofit organizations for early charitable trust agreements.
1See for example A Report of All Such English Statutes as Existed at the Time of the First Emigration of the People of Maryland, and Which by Experience Have Been Found Applicable to Their Local and Other Circumstances … and Lists of the Statutes Which Had Not Been Found Applicable to the Circumstances of the People (Annapolis: Printed by Jehu Chandler, 1811).
2This is not the place for a longer explanation of policy debates as Americans grappled with a host of weighty questions, such as the proper division of responsibilities for the general welfare between independent, private charity and legally-mandated public spending. These debates have received much scholarly attention. See for example Lawrence Meir Friedman, A History of American Law, 4th edition (Oxford: Oxford University Press, 2019); Howard S. Miller, The Legal Foundations of American Philanthropy, 1776-1844 (Madison, WI: Historical Society of Wisconsin, 1961); Irvin G. Wyllie, “The Search for an American Law of Charity, 1776-1844,” Mississippi Valley Historical Review 46:203-221 (September 1959); A.G. Roeber, “The Long Road to Vidal: Charity Law and State Formation in Early America,” The Many Legalities of Early America, ed. by Christopher L. Tomlins and Bruce H. Mann (Chapel Hill and London: University of North Carolina Press, 2001); and Carl Zollman, American Law of Charities (Milwaukee: Bruce Publishing Company, 1924.
3See Cases and Text on the Law of Trusts by George Gleason Bogert et al (Westbury, NY: The Foundation Press, Inc., 1991), p. 200. The chapter on “Charitable Trusts” begins by discussing the Supreme Court’s decision in Trustees of Philadelphia Baptist Association v. Hart’s Executors, 17 U.S. (4 Wheat) 1, 4 L.Ed. 499 (1819): “In the United States, an 1819 John Marshall opinion invalidated a charitable disposition on the ground that the doctrine was statutory and the Statute of Charitable Uses had not been enacted or adopted in Virginia.”
4Calendar of the Proceedings in Chancery, discussed below.
5Magill v. Brown, 16 F. Casa. 408 (C.C.E.D. Pa. 1833)(No. 8954).
6Bogert, Cases and Texts on the Law of Trusts, p. 200: the Supreme Court decision in Vidal v. Girard’s Executors, 43 U.S. (2 How.) 127, 11 L.Ed. 205 (1844), “which restored the law of charitable trusts to its common law origins, gave substantial impetus to the validity and use of charitable trusts in the United States.” For an overview see “The Enforcement of Charitable Trusts in America: A History of Evolving Social Attitudes” by S.F.D., Jr., Virginia Law Review, Vol. 54, No. 3 (April 1968), pp. 436-465. Developments in the laws restricting charitable trusts in New York were particularly complicated. For a masterful analysis see Stanley N. Katz et al, “Legal Change and Legal Autonomy: Charitable Trusts in New York, 1777–1893” (Law and History Review, Vol. 3, 1985).
7“Preface” to Itinera Fiduciae: Trust and Treuhand in Historical Perspective, ed. by Richard Helmholz and Reinhard Zimmerman (Berlin: Duncker & Humblot, 1998), p. 5.
8“The idea that there was a law of trusts in England, rather than separate legal entities – executors, feoffees to uses, custodians of charities, and guardians of minors – emerged slowly. It was only in the 19th century that treatises devoted to the trust as a separate body of law began to be written. Only then did what now appear to be basic theoretical questions, such as determining the exact nature of the beneficiary’s interest in a trust, need finally to be confronted.” Helmholz and Zimmerman, “Views of Trust and Treuhand: An Introduction,” Itinera Fiduciae, p. 41.
9T.G. Kardong, Benedict’s Rule: A Translation and Commentary (Collegeville, MN: Liturgical Press, 1996), 485-486.
10Wikipedia entry downloaded 8/12/2019:
A waqf (Arabic: وَقْف; [ˈwɑqf]), also known as hubous (حُبوس) or mortmain property, is an inalienable charitable endowment under Islamic law, which typically involves donating a building, plot of land or other assets for Muslim religious or charitable purposes with no intention of reclaiming the assets.The donated assets may be held by a charitable trust. The person making such dedication is known as waqif, a donor. In Ottoman Turkish law, and later under the British Mandate of Palestine, the waqf was defined as usufruct State land (or property) of which the State revenues are assured to pious foundations. Although based on several hadiths and presenting elements similar to practices from pre-Islamic cultures, it seems that the specific full-fledged Islamic legal form of endowment called waqf dates from the 9th century AD …
The waqf in Islamic law, which developed in the medieval Islamic world from the 7th to 9th centuries, bears a notable resemblance to the English trust law. Every waqf was required to have a waqif (founder), mutawillis (trustee), qadi (judge) and beneficiaries. Under both a waqf and a trust, “property is reserved, and its usufruct appropriated, for the benefit of specific individuals, or for a general charitable purpose; the corpus becomes inalienable; estates for life in favor of successive beneficiaries can be created” and “without regard to the law of inheritance or the rights of the heirs; and continuity is secured by the successive appointment of trustees or mutawillis.”
The only significant distinction between the Islamic waqf and English trust was “the express or implied reversion of the waqf to charitable purposes when its specific object has ceased to exist”, though this difference only applied to the waqf ahli (Islamic family trust) rather than the waqf khairi (devoted to a charitable purpose from its inception). Another difference was the English vesting of “legal estate” over the trust property in the trustee, though the “trustee was still bound to administer that property for the benefit of the beneficiaries.” In this sense, the “role of the English trustee therefore does not differ significantly from that of the mutawalli.”
Personal trust law developed in England at the time of the Crusades, during the 12th and 13th centuries. The Court of Chancery, under the principles of equity, enforced the rights of absentee Crusaders who had made temporary assignments of their lands to caretakers. It has been speculated that this development may have been influenced by the waqf institutions in the Middle East. [end Wikipedia cite]
See Avisheh Avini, “The Origins of the Modern English Trust Revisited,” Tulane Law Review, Vol. 10 (1995-1996), pp. 1139-1163, and Monica M. Gaudiosi, “The Influence of the Islamic Law of Waqf on the Development of the Trust in England: The Case of Merton College,” University of Pennsylvania Law Review, 136 (4), April 1988, pp. 1231–1261.
11Sir Frederick Pollock, The History of English Law before the Time of Edward I, vol. 2 (Cambridge: Cambridge University Press, 1898), page 229; see esp. the extended discussion of the history of trusts and uses on pp. 226-39.
12F.W. Maitland, Equity: A Course of Lectures, revised by John Brunyate (Cambridge: University Press, 1936; reprinted 1969), page 25. Other pioneering works on the history of English charitable trusts include J.M.W. Bean, The Decline of English Feudalism 1215-1540 (Manchester, UK: Manchester University Press, 1968); W.K. Jordan, Philanthropy in England 1480-1660 (London: George Allen & Unwin Ltd, 1959); Gareth Jones, History of the Law of Charity 1532-1827 (Cambridge, UK: Cambridge University Press, 1969); and David Owen, English Philanthropy 1660-1960 (Cambridge, MA: The Belknap Press of Harvard University Press, 1964). There is no book documenting the long history of charitable remainder trusts. The best modern history of charitable trusts is Helmholz and Zimmerman, Itinera Fiduciae (1998). Some standard legal texts on trusts include A.W. Scott, The Law of Trusts, 4th ed. (Boston: Little, Brown, 1987); American Law Institute, Restatement of the Law Third, Trusts. Vol. 1 (Philadelphia: American Law Institute, 2003); and A.M. Hess, Bogert Trusts and Trustees, Rev. 2nd and 3nd ed. (Eagan, MN: Thomson Reuters, 1980-2017).
13Richard Helmholz, “Trusts in the English Ecclesiastical Courts 1300-1640,” Itinera Fiduciae, 153-172.
14Maitland, Equity p. 25.
15Kevin Grady, “The Records of the Charity Commissions: A Source for Urban History,” Urban History Yearbook, Vol. 9 (1982), pp. 31-37. Published by Cambridge University Press, available at https://www.jstor.org/stable/44610919. Also see Richard Tompson, The Charity Commission and the Age of Reform (London and Henley: Routledge & Kegan Paul, 1979).
16“The Statute of Charitable Uses, 1601,” published in Making the Nonprofit Sector in the United States: A Reader, edited with an introduction by David C. Hammack (Bloomington: Indiana University Press, 1998), p. 6.
17W.K. Jordan, Philanthropy in England 1480-1660, p. 112.
18R.H. Bremner, American Philanthropy (Chicago: University of Chicago Press, 1960; revised 1988), p. 217. See above cite for Hammack, Making the Nonprofit Sector in the United States: A Reader.
19Joseph H. Smith, ed., Colonial Justice in Western Massachusetts, 1639-1702 (Cambridge: Harvard University Press, 1961), p. 210. Discussed by Friedman, A History of American Law, p. 31.
20James Dow McCallum, Eleazar Wheelock: Founder of Dartmouth College (Hanover, NH: Dartmouth College Publications, 1969), p. 210.
21In the Matter of Howe, etc., Executor, and Anderson, Deceased, 1828.
22Harvard College v. Amory, 26 Mass. (9 Pick.) 446 (1830), discussed in Lawrence Meir Friedman, A History of American Law, 4th ed. (Oxford: Oxford University Press, 2019), pp. 235-236.
23See E.M. North, “Annuity and Trust Agreements.” Sec. G of ABS Historical Essay 20, part 2, Financial Administration 1861–1900 (New York: American Bible Society, 1964); “Annuities and Special Agreements.” Sec. H of ABS Historical Essay 20, part 3, Financial Administration 1861–1900 (New York: American Bible Society, 1966); and ABS Historical Essay 17, part 3, Financial Administration 1861–1900 (New York: American Bible Society, 1966).
24Joel Tiffany and E.F. Bullard, The Law of Trusts and Trustees, as Administered in England and America Embracing the Common Law (Albany, NY: W.C. Little, 1862), pp. 264-266 and 337-339.
25Jairus Ware Perry, A Treatise on the Law of Trusts and Trustees (Boston: Little, Brown, 1872).
The most popular American of his time, George Washington led the war for independence against Great Britain. He was chosen to preside over the Constitutional Convention. In 1789 he was elected President of the new nation by Congress. Washington wrote his own carefully-planned will. At his death in 1799, he was one of America’s wealthiest citizens, owning 33,000 acres of land in five states and the Northwest Territory.
Historian Jill Lepore observes that “Washington’s will was published in newspapers from Maine to Georgia, as he knew it would be.” (These Truths: A History of the United States, p. 147)
He left most of his estate to his wife Martha, after making specific bequests for various purposes. Washington’s first specific bequest provisions, and the longest section of his will, dealt with an objective close to his heart: freeing, supporting, and educating his slaves.
Giving his slaves their freedom and preparing them for better lives was very important to Washington. He directed that “all the Slaves which I hold … shall receive their freedom,” shall be “comfortably clothed and fed … taught to read & write; and to be brought up to some useful occupation.” His 123 slaves were freed shortly before the death of his wife Martha.
Washington never attended college, but education was his top priority. In addition to educating his former slaves, he and made specific bequests to Alexandria Academy for a scholarship fund, to Liberty Hall Academy (now Washington and Lee University), and to a proposed college in the U.S. capital that was founded in 1821 as George Washington University.
Founding Father Benjamin Franklin was the leading champion of private, nonprofit organizations in America. For example, the Union Fire Company of Philadelphia (known as Benjamin Franklin’s “Bucket Brigade”) was a volunteer fire department formed in 1736.
In his will, Franklin made specific bequests in 1790 to grammar schools in Boston, and for improving travel on the Schuylkill River. He originally directed a gift to the Pennsylvania Hospital, but in a codicil Franklin revoked that bequest and instead set up two complex and ambitious trusts: 1,000 pounds sterling (roughly $150,000 in today’s dollars) for a revolving loan fund to benefit young, married tradesmen in Boston, and 1,000 pounds for the same purpose in Philadelphia. Management of Franklin’s trusts was uneven. After 200 years, when his funds were disbursed according to his directions, his Boston fund had grown to $4.5 million, while his Philadelphia fund was worth $2 million.
In 1836, U.S. President James Madison, “Father of the Constitution,” gave his personal library and $1,500 to the University of Virginia, and $1,000 each to the libraries at Princeton University and a college in Uniontown, Pennsylvania. Madison’s bequest was the largest monetary gift to Princeton’s library until after the Civil War.
Statutory law did not create philanthropy in America, which was baked into the nation’s character from the start. Freedom to worship as they chose, including freedom from persecution by an official state church, attracted many of the colonists to America. Drafters of the United States Constitution assumed that people would form private churches and synagogues, schools and colleges, craft guilds, libraries, and many other voluntary associations independent from the federal government.
In 1789, the Constitution of the United States of America became the legal foundation for charitable gift planning through three co-equal branches of government: laws affecting charitable giving are enacted by Congress; tax regulations and rulings are issued by a Treasury Department and its Internal Revenue Service (IRS); and judicial review is provided by a federal court system, including the U.S. Supreme Court.
The longstanding American rights to form private, nonprofit organizations independent from the federal government are articulated in the First Amendment to the Constitution, adopted in 1791:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
Touring America in 1831, Alexis de Tocqueville found it remarkable that people here naturally turned to private nonprofit organizations to accomplish public purposes that were a state responsibility in his home country of France:
Americans of all ages, all conditions, and all dispositions constantly form associations … of a thousand kinds, religious, moral, serious, futile, general or restricted, enormous or diminutive. The Americans make associations to give entertainments, to found seminaries, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; in this manner they found hospitals, prisons, and schools.
In 1829 James Smithson, an Englishman, died without visiting the U.S. Smithson wrote his own will, leaving his estate to his nephew, but if the nephew were to die without children, “I bequeath the whole of my property . . . to the United States of America, to be found at Washington, under the name of the Smithsonian Institution, an Establishment for the increase & diffusion of Knowledge among men.” His nephew died in 1835 and had no children.
In 1838, Richard Rush brought 105 sacks of gold sovereign coins from Smithson’s estate to the U.S. Mint in Philadelphia, where they were re-coined into American currency, producing $508,318.46, equivalent to about $12 million in 2019 dollars.
It was not clear that Congress would approve a large federal institution in Washington, D.C., given the focus on protecting states’ rights and opposition to expanding the national government. Should America build a monument to a British donor two decades after the War of 1812, and 70 years after the Declaration of Independence from Great Britain had been signed by Dr. Benjamin Rush, Richard’s father? The bill to establish the Smithsonian passed narrowly. In 1846, President James K. Polk signed the bill that created the Smithsonian Institution, which is now the world’s largest and most popular museum and research complex.
“We hold these truths to be self-evident: that all men are created equal.”
In 1831, Yale issued an innovative charitable gift annuity in exchange for John Trumbull’s best paintings of George Washington and the American Revolution. The planner driving the complex gift negotiations was Yale scientist Benjamin Silliman. The annuity contract was drafted by attorney Peter Jay, son of John Jay, the first Chief Justice of the United States. Annuity payments were financed by selling tickets to America’s first college art gallery.
In Vidal v. Girard’s Executors (1844), the Supreme Court validated charitable trusts under longstanding national traditions of common law, allowing private donors to create trusts for public purposes in states that had not enacted statutes recognizing charitable trusts.
The American Bible Society (ABS) accepted the management of a life income trust in 1841, and issued a gift annuity contract in 1843. ABS soon had second thoughts about the legal and financial risks of its life income gift program. Building on the Vidal decision, ABS board member Luther Bradish wrote a powerful legal defense and administrative guidelines for nonprofit management of life income trusts and gift annuities, now known as On the Matter of Accepting Trusts (1848), which led ABS to develop America’s largest gift annuity program and influenced hundreds of other nonprofits.
In the mid-19th century, states began to provide protections for consumers of financial products. A heroic figure in that story is Elizur Wright (1804-1885), an actuary who strengthened consumer confidence in financial contracts based on a human life, such as life insurance and annuities. Wright, a colorful character who fathered 18 children, fought for the abolition of slavery, and personally calculated the reserve values for every insurance policy issued in the State of Massachusetts using the Arithmeter he invented (pictured below), became one of the first Insurance Commissioners in the United States.
Often called the “father of life insurance,” Wright campaigned for four decades against abuses in the fledgling American industry. When he began his crusade in the 1840s, families concerned about the untimely death of a wage-earner had reasons to be skeptical towards financial products. In the absence of standards for holding companies accountable, there were obvious frauds, such as unincorporated “wildcat” insurance outfits fronted by “lightning agents” who pocketed premiums on policies and left town before customers knew they had been swindled. A common, unfair business practices was immediate cancellation of policies when a single premium payment was missed, with no recognition of built-up cash surrender value.
Many insurance companies’ business models were not founded on established principles of actuarial science. Honest businessmen could be acting in good faith but with inadequate understanding of how to calculate appropriate reserve funds. Competitive pressure from cut-rate premiums was increasing. Responsible insurers feared that consumers, unable to tell the difference between sound and unsound practices, would shun the purchase of life insurance altogether.
Elizur Wright deserves credit for enhancing American consumer confidence in the security of financial products based on human lives, and for his leading role in constructing a public policy framework. Wright lobbied successfully for legislation in Massachusetts compelling life insurance companies to open their books and be publicly accountable for business practices, and developed standards based on actuarial science that were later adopted by nonprofit charitable gift annuity programs.
He personally calculated the reserve values for every life insurance policy issued in Massachusetts, using a machine he invented called the Arithmeter.
Americans made charitable gifts of bequests, trusts, annuities, and complex assets long before taxes played a role in their planning. For 300 years after the colonies at Jamestown and Plymouth began, charitable gift planning was not driven by tax considerations. Our modern federal income tax system was enacted in 1913; the estate tax in 1916; and a tax deduction for gifts to qualified charities was first introduced in 1917.
Tax policy is often intended to influence behavior, including the ways Americans make gifts to charity. Today’s donors and professional advisors are properly concerned with the implications of ever-changing income, gift, and estate tax laws. Since the modern tax system was enacted, “Few, if any, significant gifts are made without a consideration of their tax consequences,” notes The Harvard Manual on Tax Aspects of Charitable Giving.
There is considerable interest in analyzing the impact that the Tax Cuts and Jobs Act (TCJA) enacted in 2017 is having on charitable giving. Millions of Americans who previously enjoyed a tax deduction by itemizing their gifts have lost that benefit by taking the higher standard deduction.