The Brooklyn Daily Eagle from Brooklyn, New York • Page 68

BROOKLYN EAGLE MAGAZINE, were set aside were so silly or impractical that they are a constant reminder to the public of their Ill-advised founders. Brown University suffers from one of the earliest of these well-meant but unwisely established trust funds. Founded in Rhode Island at a time when residents of that State were as fanatically bent on religious tolerance as their neighbors were bent on religious intolerance, the charter of the old school was framed to prevent forever the spirit of intolerance creeping in. The Board of Trustees, the charter stated, should contain some Congrega-tionalists, some Episcopalians and at least five members of the Society of Friends. That was all well enough in that day.

There were plenty of Quakers in Rhode Island, and glad they were to be there. The sovereign State of Massachusetts had hanged at least four men simply for being Quakers, and had off the ears and bored notes in the tongues of innumerable others for no more heinous offense. The Quakers had good reason for taking to Rhode Island. But unhappily for Brown in the 160 years that have passed since the school was established Quakers have become welcome citizens everywhere. And at last the supply available for the board has run out.

A distinguished committee, trying to find a way out of the dilemma, reported to the courts that when the present five Quakers on the board had finished their labors the only way In which the provisions of the charter could be met would be by electing men to fill their places who were iinfMiffin with the university. Yet so long as it is possible to get five Quakers to serve on the board, regardless of their caliber or merit, that provision, under the laws of the land, must stand. Benjamin Franklin's effort to establish a trust fund that should endure in part for 200 years is the classic and best known example today of a good trust fund gone wrong. Franklin left two funds of 1,000 each in Boston and Philadelphia to be loaned out as revolving funds through 100 years. At the end of the first century, 1891, about two-thirds of the accumulated money was to be spent to aid apprentices who had served two years under indentures.

The remainder was to be put in another revolving fund which would be spent in 1991. Franklin directed that the Boston principal be expended on pavements, fortifications, or "anything that might render the town more agreeable to strangers resorting thither for health." The Philadelphia fund, he directed, should be used to make the Schuylkill River navigable and to free the city from dependence on wells by bringing water to it in pipes. He estimated that at the close of the first 100 years his money would amount to $1,250,000, and that by 1991 it would be worth $40,000,000. We're forty years now into the second hundred years and the fund is still below the half-million mark. Even the astute Franklin couldn't govern the vagaries of industrial and economic revolutions.

Franklin was still a memory of his boyhood days when Stephen Girard, the richest man of his time, died in 1831, lei ving $2,000,000 and his residuary estate for the establishment of an institution for white, male, legitimate orphans. Girard had definite ideas of the kind of institution in which his name was to be immortalized. He left specific directions about the construction of the exterior and interior of the building. He ordered that the grounds should be surrounded by a wali ten feet high and fourteen inches thick, in which should be two gates, an outer one of wood and an inner one of iron. He didn't like the clergy, and for that reason he further directed that "no ecclesiastic, missionary or minister of any sect whatsoever shall ever be admitted for any purpose or as a visitor within the premises." He even went so far as to stipulate that practical instruction in navigation be given the orphans.

Bound and gagged from the beginning with such a disheartening set of stipulations, the trustees suddenly found themselves in even greater difficulties in trying to carry out the terms of the will. The residuary estate included among other things land along the Schuylkill where anthracite coal was presently discovered. More than 100,000,000 tons of coal have been taken from those lands since the Girard will, and the trust fund of something over $2,000,000 has been augmented to a trust fund today of more than $80,000,000, and the trustees, finding It impossible to expend the income on the Girard College, have once turned it an back into the permanent accumulation. Today, with psychology and pedagogy frowning more and more on orphanages and favoring instead the private home for parentless children, the problems of Girard are increasing still more. This tendency to establish orphanages and homes of various kinds has long been a bugaboo in the world of trustees.

Over one period of thirteen years the number of orphanages established averaged one every fourteen days. Yet 11 lease of prisoners, or to provide doweries for poor and dotless maids, that there was no land for the people. One of the oldest of these trusts is recorded by Emerson, who found a little church in Winchester, England, that was endowed in 1136 by Henry de Blois. The income from De Blois' endowment was to be used to give bread and beer to passersby, and that the priests have been doing, sometimes to the number of several hundred a day, for the last eight hundred years. In Cork, Ireland, a trust fund was established more than two hundred years ago for the support of poor old Protestant men who had been soldiers.

It sounded reasonable at the time even In Cork; but the trustees have knitted their brows ever since over the problem of spending the income from the trust. There just arent enough aged and indigent Protestant warriors in the city to require the available funds. In another English community the founder of a free school for boys set aside trust funds to provide the best available mutton for his scholars. To insure that they got only the best he stipulated the size and weights uf the carcasses to be bought. But toward the end of the Eighteenth Century some remarkable progress oc- eurred in the sheep raising industry in England and what had once been considered top grade mutton became very third rate indeed.

The boys then in school found that through the well-meant stipulations of their long-dead schoolmaster they were compelled to eat not the best but the most inferior mutton on the market It would be pleasant to record that, with scores of such examples staring them in the face, Americans had profited accordingly. It would be comfortable to think there were no such foolish trust funds left in this country. But there is neither comfort nor pleasure in some of the busts established here in the last century and a half. America has millions tied up hi frown trusts. There is one fund alone amounting to more than $80,000,000.

Another is well over $20,000,000. For obvious reasons the total amount of such trust funds has never been calculated, but it is likely that it would reach into the billions. Millions annually go into trust funds of one kind or another. The last United States controller's report showed that more than $4,000,000,000 is in trust in national banks alone and more than $17,000,000,000 more is in other trust companies. While these figures include trusts of all kinds, for both public and private benefit, the magnitude of their total would seem to indicate that a six-able percentage must be in trusts the incomes from which are designed for philanthropic ends.

Ralph Hayes, director of the New York Community Trust, estimates that within the past ten years alone more than $2,000,000,000 has been left in charitable public benefactions. The Wendel estate alone has since swelled that figure by $65,000,000 or at least. That is a sum to be reckoned with It is enough to pay the bill for the American Revolution and leave a surplus the income from which would have supported a war of similar size from 1776 to the present day. It is a sum which would wipe out the current national deficit twice over. If it were all in usefully usable funds the lives of communities in general and trustees in particular would be lighter and happier.

But almost as soon as America was founded people began establishing trusts which were inevitably to grow obsolete and frozen. Some of them have increased in value and decreased in usefulness. Some of them are comparatively inconsequential sums, but the purposes for which they modern thought is almost universally opposed to orphanages. The same thing is true of almshouses. A Georgia resident left a fund to construct a poorhouse, but the fund was insufficient to provide many facilities, and in addition the community already had an adequate place for its poor.

The court ruled, however, that the testator's poorhouse had to be built and built it was. A national survey about the same time disclosed the fact that there were 137 almshouses in this country surrounded by 19,968 acres of land without a single inmate. Incidentally, one man who wished to be remembered for all time through a trust fund left his estate to be divided among "elderly and unmarried women that are absolutely respectable, share and share alike to the last." The sad thing about all this is that the law is on the side of the trust founders. A man who wouldn't think of imposing his will upon his grandchildren may leave his money in public benefactions that will bedevil and haunt his grandchildren's grandchildren forever, and the courts will oppose any alteration of his will. So long as it is "possible" to carry out the terms of a public trust just so long under the law must those terms be adhered to, no matter in the course of years how impractical or effete or silly they may become.

The same law which protects public trust funds guards against the establishment of trust funds in perpetuity for individuals. Here in New York State a trust fund for an individual may not run for more than "two lives being." But for a philanthropy, where the lives of scores and hundreds of individuals are affected, the fund may continue forever. This, as you may have suspected, is a tale with a moral, and the moral quite clearly is: Dont establish a trust fund for public benefaction in perpetuity. Time is absolutely certain to change the conditions for which it was established. The movement of the stars in their courses is no more certain.

So unless you'd like to be remembered by posterity as a bigoted, pompous old man or woman, opinionated but without vision, dont set up a perpetual trust for public benefit. There is at present only one outstanding satisfactory way out of this dilemma. It is a plan devised in 1914 and which has been operative in New York City since 1923. It is the community trust idea, conceived by Judge F. H.

Goff of Cleveland, and now extant in seventy-five organizations throughout the country. It is a plan under which a distribution committee is set up with discretionary powers to direct the expenditure of funds left in trust in perpetuity. The committee has no jurisdiction over the funds themselves. It is merely able to direct the judicious handling of the funds so that posterity be eternally grateful instead of eternally chagrinned over its ancestors'" beneficences. Here in New York, the distributing committee consists of eleven persons, nine of whom constitute a deciding voice.

Five of the committee members are appointed by the participating banks and trust companies. The remaining six are named by the Bar Association, the Academy of Medicine, the Chamber of Commerce, the Federal Circuit Court of Appeals, the Mayor, and the Brooklyn Institute of Arts and Sciences. Mr. James H. Post is at present the Brooklyn Institute representative on the committee.

The community trust idea is still comparatively new. The business depression has halted its work to some extent. But its record has been noteworthy. Of the seventy-five authorized community trust organizations forty are now handling funds, and more than $30,000,000 In trusts Is being administered. fill VrsBss5".