Opinion ID: 2517704
Heading Depth: 1
Heading Rank: 3

Heading: Termination of the Trust

Text: Having determined that the 1976 Trust Agreement does not bar The Denver Foundation from directing a transfer of the Sterne-Elder trust principal to its nonprofit corporation, we turn now to Wells Fargo's assertion that such a transfer would merge all legal and beneficial interests in the Foundation and therefore extinguish the Trust altogether. In light of settled trust law, we reject the notion that the Trust will terminate upon transfer of the principal to The Denver Foundation. When the entire beneficial interest of a trust is held by the same person or entity that holds the entire legal interest, the trust terminates under the doctrine of merger; in other words, if the sole beneficiary also functions as the sole trustee, the trust ceases to exist. IV Austin W. Scott & William F. Fratcher, Scott on Trusts § 341 (4th ed.1989); Restatement (Third) of Trusts § 69. But for the doctrine of merger to apply, the legal and beneficial interests must be completely coextensive. In re Estate of Brenner, 37 Colo.App. 271, 274, 547 P.2d 938, 942 (1976). Conversely, if other equitable interests remain, the trust will not terminate. Id. In the case of a charitable trust, the beneficiary is the unspecified, indefinite general public to whom the social and economic advantages of the trust accrues. Restatement (Second) of Trusts § 364 cmt. a; IVA Scott on Trusts § 348 (4th ed.1989); In re Garrison's Estate, 391 Pa. 234, 137 A.2d 321 (1958). Instead of identifying a person or corporation as beneficiary, the settlor of a charitable trust must describe a purpose which is of substantial public benefit. Bogert on Trusts §§ 362-63 (rev.2d ed. 1992) As a consequence, the responsibility for public supervision of charitable trusts traditionally has fallen to the state's Attorney General, who may maintain a suit to compel property to be held for the charitable purpose for which it was given. § 15-1-1005, C.R.S. (2006); § 24-31-101, C.R.S. (2006); Bogert on Trusts § 411 (3d ed. 2005) (The public benefits arising from the charitable trust justify the selection of some public official for its enforcement. Since the Attorney General protects the rights of the people of the state, he has been chosen as the protector, supervisor, and enforcer of charitable trusts. . . .); Restatement (Second) of Trusts § 391 cmt. a (explaining that Attorney General may sue to enforce proper use of principal and income consistent with terms of charitable gift). Thus, Wells Fargo's fears of termination are unfounded. First, the 1976 Trust Agreement specifically names two preferred beneficiaries to which The Denver Foundation should distribute income. As such, these organizations have enforceable rights as named income beneficiaries that preclude application of the doctrine of merger. Matter of Estate of Doan, 727 P.2d 574, 576 (Okla. 1986) (stating that income beneficiary of bequest to community trust has substantial vested interest in construction of will). Second, because the general public, as represented by the Attorney General, is an indefinite beneficiary with enforceable rights in the charitable trust, the public interest will not merge with that of The Denver Foundation and the trust will remain intact when the corpus of the Trust is transferred for administration to The Denver Foundation. For these reasons, the court of appeals erred in concluding that the merger rule would ultimately terminate the trust if such a transfer were to occur.