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Setting Up a Charitable Trust: Step by Step Guide

By: J.A.J Aaronson - Updated: 5 Oct 2017 | comments*Discuss
 
Charitable Trust Set Up Charity Charity

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.

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We are a church with a large number of asylum seeker members. We want to set up a charitable trust as a way of collecting money to pay for legal fees in exceptional circumstances. We want to separate this from church funds.
HNJ - 5-Oct-17 @ 9:19 AM
KR - Your Question:
Hi I'm looking at the possibility of forming a charitable trust to buy a property so as to obtain SDLT relief. The trust would be for charitable purposes and the purchase would be funded by a social enterprise (company limited by guarantee) which would like to be a charity but does not have time to become one before buying the property.How quickly could one be formed?KR

Our Response:
We don't know what the time scales are at the moment, contact the Charity Commission for more information.
EstatesOrTrusts - 7-Sep-17 @ 10:00 AM
Hi I'm looking at the possibility of forming a charitable trust to buy a property so as to obtain SDLT relief. The trust would be for charitable purposes and the purchase would be funded by a social enterprise (company limited by guarantee) which would like to be a charity but does not have time to become one before buying the property. How quickly could one be formed? KR
KR - 5-Sep-17 @ 9:26 AM
Hello, I am an electrician / Security engineer based in Birmingham and have been doing the job for various companies nearly 13 years. During my time I have attended many homes where people have begged and borrowed to secure their homes after a burglary and cases where homes have needed to be rewired and not covered by insurance. I am now looking at starting my own electrical business with a slight difference. My general day to day activities will be doing paid work but I want to include a charitable fund where if the above happened to a home owner then the fund would be able to step in and help (kind of like a certain TV programme that's on during the daytime). Could you please advise on where I stand legally and what status I would need to apply for? I would not be fundraising however I have had people saying they would donate when the idea had been discussed. Many thanks
Gaz - 14-Mar-16 @ 2:27 PM
@Nick. Without seeing the conditions of the trust we cannot really advise, but sections 36-41 of Trustee Act 1925 should help.
EstatesOrTrusts - 17-Mar-15 @ 12:04 PM
This is a request for help. I am the Treasurer for a village hall, which is a registered charity.About 10 years ago (before my time) a bequest was made to "the people of our village".The executors administered their duty by deciding that the village hall would be a beneficiary.Four members of the committee of the village hall were named as trustees of the legacy.The legacy was to be invested as decided by the trustees and the village hall receive any interest or dividends. The legacy has an associated deed of trust.However, within it there is no provision for what happens when one of the trustees dies or resigns. Does a new deed have to be created every time this happens? What we would prefer to happen is that the legacy was administered by the same trustees as the village hall, so as these changed and the committee moved forward, it was just a case of informing the charity commission of the change of committee.As I read it, the legacy could be registered as a charitable trust in its own right, although it falls short of the £5,000 income.In practice it is the treasurer of the village hall who manages the funds (not that any effort is required) along with the funds of the village hall.
Nick - 16-Mar-15 @ 3:04 PM
This is a request for help. I am the Treasurer for a village hall, which is a registered charity.About 10 years ago (before my time) a bequest was made to "the people of our village".The executors administered their duty by deciding that the village hall would be a beneficiary.Four members of the committee of the village hall were named as trustees of the legacy.The legacy was to be invested as decided by the trustees and the village hall receive any interest or dividends. The legacy has an associated deed of trust.However, within it there is no provision for what happens when one of the trustees dies or resigns. Does a new deed have to be created every time this happens? What we would prefer to happen is that the legacy was administered by the same trustees as the village hall, so as these changed and the committee moved forward, it was just a case of informing the charity commission of the change of committee.As I read it, the legacy could be registered as a charitable trust in its own right, although it falls short of the £5,000 income.In practice it is the treasurer of the village hall who manages the funds (not that any effort is required) along with the funds of the village hall.
Nick - 14-Mar-15 @ 12:36 PM
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