We work with many individuals who are thinking of setting up their own private charitable trust, most often with good intentions to make the world a better place and to give for the long term to something that they care about. Those who have accumulated wealth through a variety of means find that giving can be very fulfilling and many people like the idea of leaving a lasting legacy for the world.
The reality, however, of running your own private trust in New Zealand can be far from hassle free; the legal, compliance and reporting requirements can be very cumbersome and costly, risks are growing and with changes to the Trusts Act coming into effect this month the issues are only increasing.
Many established trusts also find it increasingly difficult to attract Trustees and, in many cases, the work of administering the trust is can become onerous or disproportionate to the level of funding dispersed.
There are, however, solutions to running your own private trust, and also avoiding the fees of the big profit-makers. New Zealand now has a network of 17 not-for-profit Community Foundations, with a geographic spread covering most of the country. They run a lean model, enabling individuals to establish a fund for a specific purpose, retaining the ability to direct fund distributions, with the Community Foundation managing all governance, compliance and investment responsibilities.
Effectively, they enable generous individuals to set up their own private trust funds without all the hassle of establishing their own trust.
Many existing local trusts are also resettling their assets with their local Community Foundation, confident that their purpose will continue on and be managed under a robust structure for the future. To date trust resettlements total over $30m across New Zealand, with discussions ongoing in communities about future resettlements of trust funds.
Pooling investments and taking advantage of an existing administrative and governance structure makes good business sense, and it enables generous individuals to focus on the best bit – deciding where the money should go.
Investing funds with the local Community Foundation is an option for trust funds both big and small; we have seen trust resettlements from as little as $30k right through to a recent $10m bequest.
The funds that Community Foundations manage are the fastest growing form of philanthropy in the world today and anyone thinking of setting up their own charitable trust will feel empowered by discussing their goals and the options available. They may well be surprised how easy, fulfilling and effective their own charitable giving can be, and confident that there is a robust structure which enable them to give effectively and will endure on in perpetuity.
This article is by Eleanor Cater, Executive Director of Community Foundations of New Zealand