For some people, leaving their entire estate to their family is no longer the default approach. You may have children who are financially independent, complex family circumstances, or you may simply want your legacy to benefit the wider community. One powerful option is to structure your estate so that, after your lifetime, it is applied to charitable purposes, so your estate continues to make an impact well beyond a single generation.

Charitable Trust Structure

When structuring your estate as a charity, a charitable trust is a common choice. In essence, this arrangement is structured via your will to hold and manage your assets for charitable purposes. Your will is drafted with specific provisions to establish a trust upon your death, and that becomes a charitable organisation, with trustees managing the assets and making charitable distributions. This structure offers flexibility and allows family members to remain involved as trustees if desired.

Setting up your estate as a charity can be particularly valuable when:

1. family members are already financially secure;
2. you want your assets to continue working for causes you care about;
3. family relationships are complex and charitable purposes provide clear direction; or
4. you want to create a lasting legacy beyond traditional inheritance.

Understanding the Legal Framework

Under New Zealand law, charitable trusts operate within a well-established regulatory framework.   The Charities Act 2005 governs charitable organisations, while trust law principles ensure proper governance and accountability. When structured correctly, these entities must meet specific legal requirements, including:

1. income tax obligations governed by charitable status requirements;
2. compliance obligations for ongoing charitable operations; and
3. legal framework requirements for investment income and charitable distributions.

The key is ensuring your charitable trust meets the legal definition of charitable purposes: the relief of poverty, advancement of education or religion, or other purposes beneficial to the community.

A charitable trust can incorporate as a charitable trust board under the Charitable Trusts Act 1957. This gives the charitable trust its own separate legal identity, allowing it to hold property and enter into contracts in its own name, rather than in the name of individual trustees. 

How the Process Works

Setting up your estate as a charity involves several steps:

1. Define your charitable purposes: Your estate must serve recognised charitable purposes that are clearly defined in your will.
2. Choose your trustees: Your trustees will manage the charity following your death. Consider appointing a mix of family members and independent trustees with relevant expertise.
3. Structure your will: Your will needs specific provisions creating the charitable trust, defining its purposes, appointing initial trustees and setting out basic governance rules.
4. Plan for compliance: Charitable trusts have ongoing legal obligations including registration with Charities Services, annual reporting and governance requirements.

The key is getting the structure right from the start to avoid complications later.

Common Considerations

1. Family provision: You can structure your estate to provide for family members while directing the remainder to charitable purposes. This might involve specific bequests to family with the residue forming the charitable trust.
2. Asset types: Different assets present different challenges. Property or shares may need to be sold, while cash is more straightforward to incorporate into a charitable trust. Your trustees will need clear powers to deal with various asset types.
3. Governance: Consider how decisions will be made, what happens if trustees disagree, and how new trustees will be appointed over time. Clear governance structures prevent disputes and ensure effective operation.
4. Professional oversight: Most charitable trusts benefit from independent professional trustees or advisors to ensure proper governance, compliance, and effective charitable distribution.

Getting Started

If you are considering setting up your estate to operate as a charity, early planning is essential. The legal structure needs to be carefully designed to meet charitable law requirements while reflecting your specific intentions and family circumstances.

At Wynn Williams, we can help you decide whether establishing a charity through your estate might align with your legacy objectives. We can guide you through the legal requirements and help structure your will to create an effective charitable organisation.

Author bios:

Annabel Sheppard | Partner With over 30 years’ experience in property and asset law, Annabel provides expert advice on a range of matters related to estate planning, including wills, enduring powers of attorney and issues involving the formation and management of trusts. She also huge experience in all aspects of the sale and purchase of residential and rural property.

Danita Ferreira | Senior Associate Danita is an experienced corporate and commercial lawyer, specialising in business restructuring, corporate governance, mergers and acquisitions, and commercial contracting. Within this realm, she advises clients around shareholder arrangements, joint venture opportunities, capital raising and day-to-day needs.