How to form a charitable trust

Introduction

If you wish your property to be used for a charitable purpose you may decide to establish a charitable trust.

A charitable trust differs from other trusts in that it does not have particular beneficiaries but instead is for a particular purpose. This type of trust therefore need only identify a class of people and not particular individuals as beneficiaries. See generally How to form a trust .

As with creating any trust you should choose the trustees carefully.

The charitable purpose

A charitable trust must have one of four basic purposes:

• relief of poverty
• advancement of education
• advancement of religion
• some other purpose that is of benefit to the community

Registration as a trust board under the Charitable Trusts Act

You may decide to take advantage of the many benefits that arise through registering the trustees as a trust board under the CHARITABLE TRUSTS ACT 1957. Registration under the Act may allow the trust to enjoy many tax exemptions, including donations being tax deductible.

The registration of the trust board means that the trust becomes a separate legal entity, and as a result many of the administrative inconveniences and expenses of an ordinary trust are avoided.

How to register

To register as a trust board you will need to apply to the Registrar of Incorporated Societies at the Companies Office. The Companies Office is a part of the Business and Registries Branch of the new Ministry of Economic Development. For contact details, see the Ministry’s website at www.med.govt.nz.

The application must be in the form set down in the Act or to similar effect, and must be signed by a majority of the trustees. You must attach a copy of the trust deed to your application, and a statutory declaration from one of the trustee applicants. There is no application fee.

Cautionary notes

• To receive the various advantages achieved through registering the trust, it is essential that you seek the advice of a lawyer, who will not only inform you of the suitability of creating a charitable trust for this purpose but will also prepare the appropriate documents. This is important, as the Inland Revenue Department usually reviews extremely carefully any charitable trust deeds before it confirms that the trust meets the criteria for tax benefits.
• You will need to consider carefully what you are attempting to achieve by forming a charitable trust. Is it to attract donations? Is it to provide benefit to a certain institution, organisation or movement? Different forms of trusts are required for different purposes, and you should talk to a lawyer specialising in trusts before going too far.