Setting Up a Charitable Trust: Step by Step Guide

There are numerous reasons for setting up a charitable trust. Many people want to ensure that their assets are used to fund charitable ventures, and they establish a trust as a form of guarantee that those assets will be disbursed in a suitable manner. Alternatively, some people establish charitable trusts in order to take an active role in the life of existing charities – or to set up a charitable venture of their own.

Setting up a charitable trust is not a particularly onerous task, despite what some organisations will have you believe. There are numerous bodies offering to do the work on your behalf and, while you may wish to take advantage of this, there is no reason why someone with a bit of time and patience cannot do it themselves.

1. Draw up a trust document

To begin with you will need to draw up a Trust Deed. This is the document that governs the way in which the trust is run. It will explain how members will determine which causes the trust will support, and may outline any limits on the way that assets can be disbursed. It is important that this document is legally valid – and, if you intend to apply for charitable status, that is satisfies the Charity Commission requirements. You may wish to have a solicitor help you with this. It is also important to remember that trustees will generally not be permitted to benefit from the trust. This means you are unlikely to be paid for your work.

2. Fund your trust

Having established your trust you will need to fund it. You can do this by transferring assets yourself (known as a Gift of Property or, in the case of stocks, a Gift of Shares), or by soliciting donations. If your trust satisfies the Charity Commission requirements you will also be able to claim Gift Aid on donations made. However, you should remember that this is only the case for donors that are UK taxpayers.

3. Apply for charitable status

It is generally advisable for charitable trusts to apply for charitable status. This will provide you with favourable tax treatment, amongst other perks. However, it does increase the regulatory burden on your activities; you will be required, for example, to submit regular accounts to the Charity Commission.

Applying for charitable status is not a complicated process, but it does involve a lot of form-filling. There is further information on the application procedure available on the Charity Commission website.

4. Submit your records

It is important to remember that you have certain responsibilities as a trustee. You will be legally obliged to submit accounts to HM Revenue and Customs and, where relevant, to the Charity Commission. You will have to do this on an annual basis, and the trustees will be personally liable for prosecution if this does not happen. Many charitable trusts enlist the services of accountants to help guide them through this process.

Setting up a charitable trust does not need to be a hugely complicated procedure. However, given the legal responsibilities endured by trustees, and the importance of getting your trust document right, you may well want to seek independent help. If you have a sound Trust Deed and a viable plan for funding your trust, you are well on your way to establishing a lasting charitable venture.