Charitable Trusts
This blog gives a basic outline of charitable trusts, and a list of the information we would need if you wanted to set one up.
A trust is created by signing a trust deed (usually 10-15 pages), which we prepare. It will include a description of the charitable purposes that the trust is to achieve. Under New Zealand law, there are four charitable purposes:
Benefit to the community.
Advancement of education.
Relief of poverty.
Advancement of religion.
You specify which purpose/s apply to your intended activities. You should then have some bullet points detailing activities you will carry out to achieve those charitable purposes. You are not obliged to do all the activities all the time, but everything the trust does must fall within at least one of the four specified purposes.
Practically any name for the trust will be acceptable, so long as it is not too close to something already operating. It would normally read “Name Charitable Trust.” The last two words aren’t essential but they are recommended because there is a clear message that it is a charity.
The trust will be governed by a Board of Trustees, who are responsible for high level strategic direction and oversight. 3 - 4 Trustees would be normal, to share the load. Too many trustees might be unworkable, but anyone else can volunteer or be employed by the trust to do the day-to-day work.
Trustees can have a term of office (e.g. one or two years) and be eligible for reappointment. The power to add and remove Trustees could be held by specific people, or it can rest with the trustees themselves.
Trustees may delegate tasks, but they always have overall responsibility for the proper functioning of the trust. We can build in limits on the liability of individual trustees, but the bottom line is that trustees must know and follow the terms of the trust deed, and they must act honestly and in good faith.
No individual is allowed to benefit financially from a charitable trust, though genuine employment arrangements at normal market rates are acceptable. Proper documentation needs to be kept in case there is ever a challenge to how the trust has been operated.
We can help you register the trust with Charities Services. There is no tax on the income of registered charities, and anyone donating money to them will receive a tax rebate. But, to remain registered, charities must file an annual report that summarises their activities and financial position. Compliance is simplest for charities with expenses under $140,000 a year. The Charities Services website explains this and has a template spreadsheet for small charities to use. In our trust deeds, auditing or review of the accounts is optional. You don’t want to incur unnecessary costs, but sometimes a funder requires an audit, and you may decide it is worth it to get the funding.
Things we will need to know if you want us to prepare a trust deed:
Trust name.
Full names of the trustees.
The physical address of the trust (the home address of one of you would be okay).
Your thoughts on the purposes of the trust (we might need to discuss this).
And, in case this all seems too much, bear in mind that there are already lots of charities in New Zealand. Sometimes creating a new one is not the best way forward, and you may be better to connect and work with an existing organisation.