Trusts that will donate the gift of eternal life: Andrew Bibby explains how to set up a fund that will be providing donations in your name long after you are gone

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The Independent Online
LAWRENCE Attwell, who died in 1588, the year of the Spanish Armada, was a fur dealer. Henry Smith, who wanted to help victims of the Barbary pirates, was a salt merchant. Sir John Cass was Sheriff of London. Cliff Richard is a popular singer. All established charitable trusts that now bear their names.

They are among the many privately established trusts which, year after year, give to good causes the income raised from the founders' original capital. The concept has changed little in 400 years, even if the charitable objectives have (for example, Barbary pirates are less of a problem these days).

Sir John Cass's Foundation continues to support education in inner London 300 years after Sir John set up a school for 90 children in the City. Children who benefit from his altruism still commemorate Sir John at an annual Founder's Day Service when they wear red feathers, a symbol of the blood their benefactor is said to have spilled when he died of a haemorrhage as he signed his will.

Setting up your own charitable trust is not necessarily only for the super-rich. In theory, any amount of money will do. 'There's no fixed limit, and you can set up a charitable trust with as much or as little as you like,' says John Battersby, an accountant with KPMG Peat Marwick. 'My own view is that, if you're going to go to the trouble, then you need to be putting in at least pounds 10,000 or more - probably pounds 20,000. You need a significant amount of capital to generate the income.'

The process of establishing a charitable trust is surprisingly straightforward (and likely to become easier in 1993, when the Charity Commissioners produce a model trust document). In England and Wales, a trust needs to have its charitable status recognised by the Charity Commissioners and the Inland Revenue (different procedures operate in Scotland and Northern Ireland).

Charities can exist to support one or more of the four basic charitable objectives: the relief of poverty, the advancement of education, the advancement of religion or the benefit of the community. (This last category is not as all-embracing as it might seem).

There is no difficulty in arranging for your charitable trust to bear your name: 'Yes, it could be the Bloggs Family Charitable Trust,' says Christine Robinson, tax consultant with Robson Rhodes. Nor must you necessarily have external trustees: 'The trustees could be the donor and other members of the family,' Ms Robinson says. However, she adds that trustees do need to be aware of their legal responsibilities and may want a professional adviser among them.

Charitable trusts may be primed with cash gifts, or with donations in kind. 'An entrepreneur who has built up a successful company might decide to put shares into the trust. The charity would receive the dividends and would benefit if the company were sold to a third party,' Ms Robinson says.

Another possibility, according to Caroline Graham, a solicitor with the London firm of Simmons and Simmons, is to use the charitable trust structure to protect for perpetuity a landscape or unspoilt piece of land. Land trusts can be charitable, provided the public benefits in some way. 'A lot of people don't like the idea of keeping the property from their families, but some people think that preserving their land indefinitely is more important,' she says.

It would be hard to devise a more generous tax regime than the one available for charitable trusts. Any cash gifts (over the pounds 400 threshold) may benefit from full income tax relief through the Gift Aid scheme. Other capital passed to the trust will be free of capital gains and inheritance tax liabilities. The trust's subsequent income and capital gains will also normally be exempt from tax (one exception is income made from trading).

Of course, to enjoy these tax benefits the trust must be legitimately using its resources to meet its charitable aims, rather than simply providing back- door support to the donor or family.

The 1992 Charities Act provides a welcome tightening of controls and, from next September, almost all charities will have to file annual accounts, which will be available for public inspection. The Inland Revenue also takes an interest in charities' activities.

Unlike other forms of trust, charitable trusts are not subject to an eventual termination requirement, which means that in theory the trust you establish can carry forward your name for ever. It is, perhaps, one way to achieve immortality.

For anyone who is looking for a simpler alternative, the Charities Aid Foundation provides a Trust Account scheme, which offers much of the flexibility of having your own charitable trust, but without the legal and administrative tasks. The foundation, however, charges an annual management fee of up to 1 per cent of capital.

Interest and any tax rebates are credited to your particular Trust Account and a 'charity chequebook' is provided for making donations from your fund. There is a minimum asset level of pounds 10,000 required for new Trust Accounts; smaller gifts may be placed in a Charity Account scheme.

(Photograph omitted)

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