18 August 2022

Charity begins at home; the establishment of Trusts for Charitable Giving.

Written by Andrew Davison

For a variety of reasons, it is becoming increasingly common (for companies and private individuals alike) to consider making donations to worthwhile causes. To comply with Corporate Social Responsibility requirements; ensuring that worthy causes are able to achieve their intended goals; or even as part of a tax planning strategy for the Donor – many positive outcomes can be achieved by charitable giving. However, an increasing number of charitable gifts are being given within the scope of an established Charitable Trust. What are Charitable Trusts, and why are they being adopted on an ever-increasing basis?

What is a Charitable Trust?

As the name suggests, it is a Trust that is established to administer a single gift, or a series of ongoing gifts, exclusively for charitable purposes. Under the terms of a Charitable Trust, the person making the gift (known as the “Settlor”) transfers assets to the persons who will oversee the Charitable giving (known as the “Trustees”), with the direction that the assets are to be used for a pre-ordained charitable cause or purpose. The Charitable purposes that are to benefit are set out within the terms of a “Trust Deed”, which establishes the causes that are to benefit; provides direction as to how the Trustees are to support those causes; and can stipulate any other provisions or requirements which are of particular importance to the Settlor.

Why establish a Charitable Trust?

Although any form of charitable giving is undoubtedly beneficial, certain aspects of the Trust structure lend themselves well to charitable donations:

  • The Settlor can enjoy a degree of ongoing involvement in how their donation is used, by appointing themselves as a Trustee of the Charitable Trust (and therefore having a role in the administration of the fund);
  • The Settlor may also grant the Trustees a degree of discretion as to how Trust funds are applied, which can allow the Trustees to benefit a potentially wide range of beneficiaries in support of an overall charitable cause;
  • After the gift has been made to the Charitable Trust, it is possible to amend certain aspects of the Trust’s operation, to give increased emphasis to the Settlor’s original charitable intention, or fine-tune the operation of the Trust;
  • If the Settlor has specific intentions regarding the administration of the Trust, these particular wishes can be set out in the governing Trust Deed, or made known to the Trustees by way of a “letter of wishes”, so that this intention can be borne in mind when making decisions on behalf of the Trust;
  • By creating a Charitable Trust, which can be sustained by additional financial investment over a prolonged period of time (either by the Settlor, or other third parties), a Settlor’s charitable legacy can be preserved, possibly over a period of many years.

How is the Charitable Trust established?

When a Settlor has decided that they wish to establish a Trust for the purposes of charitable giving, the first stage is the preparation and execution of their Trust Deed. Due to the nature of such Trusts, it is important that this Deed be prepared in contemplation of the guidance set out by the Charity Commission for Northern Ireland, particularly in respect of which the governing principal of “Public Benefit”. Once the Trust Deed has been drawn up and the Charitable Trust established, the Trust must be registered with the Charity Commission to be awarded recognised charitable status.

Registration as a Charity.

For registration with the Charity Commission to be completed successfully, the Trust will have to prove that its aims fall within one of the twelve accepted charitable purposes (as defined in legislation), and must also satisfy the Charity Commission that its purposes give rise to a sufficient level of “Public Benefit”. The work supported by a Charitable Trust must be for the benefit of the general public, or at least a sufficiently broad element of the public. Due to the importance of registration for the successful operation of the Charitable Trust, it is vital that these requirements are borne in mind when the Trust Deed is being prepared.

Once registered, the Trust must comply with the regulatory requirements of the Charity Commission, including submission of annual accounts, ensuring that the register of Trustees is kept up to date, and any other changes regarding the governance or operation of the Trust are recorded in an appropriate manner.

Whilst the creation and administration of Charitable Trusts is becoming increasingly common for philanthropic donors, it is an area that requires careful planning and preparation. If you would like to explore this possibility in further detail, Carson McDowell’s Private Client team have a wealth of experience in the establishment of Trusts, and can provide detailed advice and assistance in respect of registration with the Charities Commission of Northern Ireland. If you would like further information or have questions regarding the processes involved, please contact Neil Bleakley, Andrew Davison or Naomi Lamont.

**This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances. not intended to be taken as legal advice.

About the author

Andrew Davison

Senior Associate

Andrew Davison is a Senior Associate in the Private Client team at Carson McDowell. Andrew provides assistance to clients in a wide variety of Private Client matters, including the preparation of Wills, Estate planning and implementation of Trusts.