What is a non-charitable trust
A non-charitable trust, also referred to as a purpose trust, is structured in such a way that it has no direct beneficiaries. Instead, it is formed for an alternative purpose, and is said to be a non-charitable trust where it fails the charitable test. Understanding the characteristics, benefits and obligations of a non-charitable trust is complex and as such it is advised to enlist the help and advice of a professional consultancy firm that specialize in the formation of trusts.
For more information on the different types of trusts available or to find out how DeltaQuest can assist you with your non-charitable trust, please Contact Us.
Non-Charitable Trust Explained
A non-charitable trust is set up by an individual, or settlor, to serve a specific function or purpose. Non-charitable trusts are typically developed to help maintain or fund the upkeep of animals, land, buildings, grave stones and so on.
When forming a non-charitable trust, it is important to choose the most favorable jurisdiction for the specific purpose of the trust. The perpetuity of a non-charitable trust is subject to a ban, as this type of trust is formed for a limited period of time, meaning that it cannot continue forever. However the specific duration of time permitted for the trust will depend upon which jurisdiction it is established in.
Beneficiaries of a non-charitable trust have to be specifically detailed as such within the trust’s deed, as they are not subjected to the cy-pres doctrine, which is a legal doctrine stating that the trust deed is open to interpretation of the court.
A non charitable trust can be used by the following parties:
Private trust companies – for the purpose of holding shares
Special purpose vehicles (SPVs) – to hold shares
Altruistic activities – for example, to promote public interest objects that are not of a charitable nature
Trade associations – promotion of interests of particular trade associations, clubs or other unincorporated bodies which are not charitable.
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