KEY POINTS:
Mark Cassidy, Guardian Trust's manager of philanthropy, on the
benefit of creating a charitable trust.
How do charitable trusts differ from other types of trusts?
A charitable trust is similar to any other trust. Trustees hold assets or investments for the purposes specified in the trust deed. With charitable trusts, there are no individual beneficiaries, but a particular charitable purpose or purposes. In some cases a particular charity may be named as beneficiary, while in others the trust may provide trustees with a wider discretion to support a range of causes. When trustees have such a discretion they can apply grants to organisations that best fulfil objectives in the trust deed.
Are there any restrictions on the type of charity I can choose? What does "charitable" mean?
It is not enough to simply "do good works" or "support community activity". To qualify, charities must fulfil one of four purposes: the relief of poverty; advancement of education (in any field, as long as there is some public benefit); advancement of religion (with public benefit); or other purposes beneficial to the community, such as animal welfare, recreational facilities or civic amenities.
What is the benefit of creating a charitable trust instead of simply making donations?
With a charitable trust, a donor can provide a lasting contribution to causes. It also means their legacy lasts after their lifetime. While a one-off donation can be made at any time, it only provides an immediate benefit and is often used to meet running costs of an organisation or a programme. Creating a perpetual income stream from a charitable trust is ongoing.
What if the trust is registered under the Charities Act 2005? Are extra benefits conferred?
Charitable trusts do not have to register with the Charities Commission to be legally charitable. But there are advantages in doing so. One is all non-business income earned by the trust and all business income used for charitable purposes in New Zealand is exempt from income tax. Any gifts made to a registered trust will not attract gift duty. There are also other tax advantages to be gained for the donor and the recipient charity arising out of the recent removal of the tax rebate cap.
Can I set up a charitable trust to be active during my lifetime?
Yes _ a charitable trust can, or it can come into effect after your death. Another option is establishing a "shell" trust during your lifetime and leave funds to it in your will.
How can I help a charity become self-sustaining, so all money raised can be used for the cause?
The development and growth of an endowment fund can be an effective way to fund the future operating costs of the charity. To be successful, an endowment fund is best developed in conjunction with the charity itself.
