Advantages of Charitable Trusts
Most commonly, trusts are established with the intention of safeguarding assets for either the settlor (that is, the individual establishing the trust) or for their potential beneficiaries or dependants. These beneficiaries do not, however, necessarily need to be related to or dependant upon the settlor. Rather, trusts also offer a chance to commit to tax efficient charitable giving.
Charitable trusts can be established by anyone who wishes to dedicate a portion of their assets to charity. The total amount of these assets is unimportant; charitable trusts can be established with any amount. Similarly, the terms of the trust can be worded in such a way as to ensure that the assets are either spread amongst different charitable organisations, or dedicated only to one.
Tax StatusPerhaps the most obvious advantage of a charitable trust is its tax status. Any such trust is treated, for tax purposes, as a charity in and of itself. As a result, it is possible to secure significant tax exemptions. In the first instance, all donations made to the trust (that is, all assets transferred into it) will be eligible for full tax relief. This continues into any investment income that is earned by the trust.
If, for example, it is deemed beneficial for the trust to invest some of its assets in order to produce a greater return, no tax will be payable on that investment income. Similarly, although charitable trusts can also be constituted as companies, no corporation tax will apply. Further down the line, if the trust is eventually required to operate from its own office space, it will be similarly exempt from business rates.
FrameworkOn a more personal level, charitable trusts are advantageous in that they provide an opportunity for individuals to give some structure to their giving. A well-planned trust, almost regardless of the amount being donated, will help to give some sense that your assets are being put to constructive use. Furthermore, establishing this sort of framework for giving helps many people to donate more effectively; rather than sporadic bursts of charitable giving, a trust can help to give some direction to your charitable activities.
AnonymityAnother key advantage for many people is the anonymity offered by charitable trusts. If you are giving as an individual, your name will almost certainly be attached to the donation. Becoming disassociated from these donations, particularly if they are large, can be difficult. A charitable trust offers the opportunity to make donations without ever being personally identified or associated.
On the other hand, however, a charitable trust can also provide an opportunity to give a cohesive identity to a collection of donors or donations. The settlor need not be the only donor and, as such, a well-named charitable trust can help to foster a sense of community and cooperation amongst givers.
Charitable trusts are potentially very useful, and are relatively simple to establish. The articles throughout the rest of this section help to explain the process of setting up your own charitable trust, and some of the factors that must be considered.