Words like “charity”, “trust”, “foundation” and “charitable organisation” are used interchangeably in everyday conversation, which makes it surprisingly hard to find a straight answer when you ask: what is a charitable trust, and is it different from any other charity? This FAQ-style guide answers the questions people most often ask, in plain English.
A caution first. Charity law varies from country to country, and even within the United Kingdom it differs between nations. What follows is general information to help you understand the concepts, not legal advice. If you are setting up or running a charity, speak to a qualified adviser or the relevant regulator.
What is a charity?
A charity is an organisation set up for purposes that the law recognises as charitable and that provides a public benefit rather than private profit. Typical charitable purposes include relieving poverty, advancing education, advancing religion, promoting health, supporting the arts, protecting the environment, and other purposes beneficial to the community.
Importantly, “charity” describes what an organisation is for and how it is regulated, not how it is structured. Charities can be run in several legal forms.
What is a charitable trust?
A charitable trust is a charity that is set up under a legal document called a trust deed (or sometimes a will). Assets such as money, land or buildings are placed in the hands of trustees, who must use them to carry out the charitable purposes set out in the document.
Some key features:
- The founder (or settlor) gives the assets and sets the purposes.
- The trustees hold and manage those assets, and make decisions about how to use them.
- The beneficiaries are the people or causes the charity is intended to help.
- The trust deed explains purposes, powers and rules.
Many long-established local charities, such as almshouses or funds for the education of children in a parish, are charitable trusts. Some modern grant-making bodies also use this structure.
How does a charitable trust differ from other types of charity?
Charities in some countries can take several legal forms. The main ones, in broad terms, are:
| Structure | Basic idea | Typical features |
|---|---|---|
| Charitable trust | Assets held by trustees under a trust deed | Trustees are personally responsible; no separate legal “person” in many cases |
| Unincorporated association | A group of people who agree to run a charity under a constitution | Informal, flexible; members may have personal liability in some circumstances |
| Charitable company | A company limited by guarantee with charitable aims | Separate legal personality; limited liability for members |
| Charitable incorporated organisation (CIO) | A legal form designed for charities in some parts of the UK | Separate legal personality; regulated by the charity regulator rather than company law |
| Royal charter body or statutory body | Established by royal charter or Act of Parliament | Often older, large bodies |
Each form has pros and cons, including how easily it can enter contracts, employ staff, and protect trustees from personal liability. If you are thinking of setting one up, seek advice about which suits your plans.
What do trustees do?
Trustees are the people legally responsible for governing a charity. Their main duties usually include:
- Acting in the charity’s best interests and in line with its purposes.
- Managing resources responsibly, including keeping accounts and avoiding unnecessary risk.
- Acting with reasonable care and skill.
- Complying with the governing document and the law.
- Avoiding conflicts of interest, or managing them transparently.
- Ensuring accountability, including filing accounts and reports.
Trustees are normally unpaid, although charities may reimburse reasonable expenses. In many places trustees can be paid only in limited circumstances, subject to rules and sometimes regulator approval.
Being a trustee is a responsible role, but it can be rewarding and is an important way to contribute skills. Anyone considering it should read the regulator’s guidance and ask about training, insurance and induction.
Who is a charity’s “owner”?
Charities do not have owners in the way that businesses do. The assets belong to the charity and must be used for its purposes. Trustees control them on the charity’s behalf, but they cannot take the assets for personal benefit. If a charity closes, remaining assets generally must go to another charity with similar aims, according to its governing document or the regulator’s direction.
Are all trusts charities?
No. A trust is a legal arrangement in which one person or group holds assets for the benefit of others. Many trusts are private, for example family trusts that hold property for relatives. These are not charities and do not have public benefit purposes. A charitable trust is a trust whose purposes are charitable and which meets the legal tests.
Names can be confusing too. An organisation with “Trust” in its name might be a charitable trust, a company, an association or something else. Checking the legal form and registration details is the most reliable approach.
What about foundations?
“Foundation” is another label that can mean different things. In some countries a foundation is a particular legal form; in others it is simply a name chosen by a charity, often a grant-making one. As with “trust”, look at what the organisation actually is and does rather than the label.
How are charitable trusts funded?
Funding depends on the trust. Some have an endowment, meaning an investment fund or property that generates income, which is used to pay for activities or grants. Others rely on donations, grants or trading income. Many use a mix.
Because endowed trusts often spend only the income, they can last for generations, although trustees need to manage investments carefully. Others, called “spend-down” charities, intend to use all their assets within a set time.
Do charitable trusts pay tax?
Charities in many countries receive tax advantages, such as exemptions on certain types of income and gains if used for charitable purposes. The rules are detailed and have conditions. Charity trustees should take advice and follow guidance from the tax authority.
How can I find out whether an organisation is a registered charity?
Use the official register in the relevant country. You will usually find the organisation’s name, registration number, stated purposes, trustees (in some cases), and financial information. If an organisation says it is a charity but cannot be found, ask them to explain. They may be below the registration threshold, newly set up, or not a charity at all. Our checklist on questions to ask before donating explains what else to look for.
How do charitable trusts make grants?
Grant-making trusts and foundations usually follow a process:
- Publish their priorities and criteria, including who can apply and for what.
- Receive applications through forms, online portals or letters.
- Assess them against criteria, often with staff or trustees reviewing.
- Make decisions at trustee meetings.
- Monitor and learn through reports or conversations with grantees.
If you are applying for a grant, read the guidelines carefully. Many trusts only fund particular places or causes, and they may refuse applications that do not fit. Contact them if you are unsure rather than sending a generic application.
Can a charitable trust change its purposes?
Sometimes, but not freely. The governing document may include a power to amend purposes, and changes might require regulator consent. Courts or regulators can also approve schemes that update old charitable purposes that have become impractical. If you are considering a change, you will need specialist advice.
What happens if a charity is badly run?
Regulators have powers to investigate concerns, issue guidance, require changes, appoint or remove trustees and, in serious cases, close down organisations. If you have a concern about a registered charity, you can usually report it to the regulator.
How can I get involved?
You can give time, money or skills, apply to be a trustee, or attend events. Before committing, check the charity as described in our other guides. Local organisations often welcome offers of help with governance, accounts, publicity or fundraising.
Frequently asked questions
Is a charitable trust the same as a non-profit?
Not exactly. “Non-profit” is a general term for organisations that do not distribute profits to owners. A charity is a specific legal status with particular purposes and obligations. All charities are non-profit in this sense, but not all non-profits are charities.
Can a charitable trust employ staff?
Yes, but depending on the structure, the trustees may be the employers in a personal capacity. For this reason, many charities that employ staff choose an incorporated form. Take advice before hiring.
Can I leave money to a charitable trust in my will?
Many charities accept legacies. You should speak to a solicitor or will-writer, and check the charity’s exact name and registration details to ensure the gift reaches the right organisation.
How do I set up a charitable trust?
Start by clarifying your purposes and who will benefit, then seek advice on structure, governance and registration. A regulator’s website usually explains the steps and thresholds. A solicitor or specialist adviser can help draft a governing document.
Questions to Ask Before Donating to a Charity
Conclusion
A charitable trust is simply a charity whose assets are held by trustees under a trust deed to pursue public-benefit purposes. It sits alongside other charity structures, each with its own strengths. If you are donating, volunteering or thinking of founding something, the most reliable approach is to check the official register, read the governing document where available and ask questions. For anything that involves legal, tax or governance decisions, take professional advice.
