Should I Create a Charitable Trust? A Practical Guide for UK Donors

If you’ve been thinking about giving more than just a donation-maybe even creating a lasting legacy-then you might be wondering: should I create a charitable trust? It’s not a decision to make lightly. But for many people in Scotland and across the UK, setting up a charitable trust is one of the most powerful ways to ensure their values live on long after they’re gone.

What Exactly Is a Charitable Trust?

A charitable trust is a legal structure where you put money, property, or assets aside to support a cause you care about. Unlike simply writing a cheque to a charity, a trust lets you control how those funds are used, who benefits, and even how the charity operates. It’s not a charity itself, but it can fund one-or even create one.

In Scotland, charitable trusts are regulated by the Office of the Scottish Charity Regulator (OSCR). To qualify as charitable, the purpose must be for the public benefit. That means helping people, animals, the environment, education, health, or culture-not just helping your friends or family.

Think of it like planting a tree. You don’t get to sit under it forever, but you know future generations will.

When Does a Charitable Trust Make Sense?

You don’t need to be a millionaire to start one, but you do need a clear goal and enough assets to make it work. Here are the most common situations where a charitable trust is the right move:

• You want to support a cause that doesn’t have a charity yet-like helping local refugees or funding mental health workshops for teens in rural areas.
• You’ve inherited property or a lump sum and want to give it away in a structured, lasting way.
• You’re worried that your current donations might stop if you die or lose income. A trust keeps giving.
• You want to involve your family in giving-your kids or grandkids can become trustees after you.
• You’re looking for tax advantages. Charitable trusts in the UK can reduce inheritance tax and sometimes income tax.

One real example from Edinburgh: a retired teacher set up a trust to fund free music lessons for children in low-income housing estates. She put £150,000 into the trust. The interest earned each year pays for instruments, teachers, and transport. She passed away two years later. The trust is still running. The kids now perform at the Usher Hall.

How Much Money Do You Need?

There’s no legal minimum, but in practice, you need enough to cover setup costs and keep the trust running. Most people start with at least £50,000-£100,000. Why? Because:

• Legal fees to draft the trust deed: £2,000-£5,000
• OSCR registration fee: £100
• Annual accounting and compliance: £1,000-£3,000
• Bank fees and trustee expenses

If you have less than £50,000, consider donating to an existing charity with a donor-advised fund. Many big charities like the Scottish Community Foundation offer these. You get similar control without the overhead.

But if you have £100,000 or more, and you’re serious about making a difference, a trust gives you real power.

How to Set One Up

Setting up a charitable trust isn’t something you do on a weekend. It’s a process. Here’s how it works in Scotland:

1. Define your purpose. Be specific. “Help children” is too vague. “Fund after-school art programs for primary school children in North Lanarkshire” is clear.
2. Choose your trustees. These are the people who will manage the trust after you. They must be over 18, trustworthy, and willing to take on legal responsibility. You can’t be the only trustee. At least two are required.
3. Write the trust deed. This is the legal document that spells out your rules: what the trust does, who can benefit, how money is spent, how trustees are replaced. A solicitor writes this. Don’t use a template from the internet.
4. Transfer your assets. This could be cash, land, shares, or even a life insurance policy. Once it’s in the trust, it’s no longer yours.
5. Register with OSCR. You’ll need to submit the trust deed, trustee details, and a statement of your charitable purpose. OSCR takes 4-8 weeks to approve.

Once approved, you’ll get a charity number. You’ll need to file annual returns, keep financial records, and make sure your spending matches your purpose.

Pros and Cons

Let’s be honest-there are trade-offs.

One person I spoke to in Glasgow regretted setting up a trust to help homeless veterans-until he realized he couldn’t expand it to include mental health counselling. The trust deed only allowed food and shelter. He spent years trying to amend it. It took legal action.

Alternatives to a Charitable Trust

You don’t have to go this route. Here are other options:

• Donor-advised funds (DAFs): Put money into a fund managed by a charity like the Scottish Community Foundation. You recommend grants, they handle the paperwork. Start with as little as £5,000. Lower cost, less control.
• Leave a gift in your will: Simple, no upfront cost. But you lose control after death. No tax benefits while you’re alive.
• Found a charity: More work than a trust. You need to recruit trustees, run a board, file more reports. Only worth it if you’re planning to raise more than £250,000 a year.

If you’re unsure, start with a DAF. Test your idea. See how much impact you can make. Then decide if you want to go deeper.

What Happens When You Die?

This is the biggest reason people set up trusts. When you die, the trust keeps going. Your assets don’t go through probate. They’re already protected. Your family doesn’t have to fight over them. The trust continues to support your cause.

But here’s the catch: you need to name successor trustees. If you don’t, the court appoints someone. That person might not know your values. They might sell the property you left. They might redirect the money.

That’s why your trust deed must include a clear succession plan. Name at least two backup trustees. Talk to them. Get their agreement. Write it down.

Common Mistakes to Avoid

I’ve seen too many good intentions go wrong. Here are the top mistakes people make:

• Not getting legal advice. A bad trust deed can be impossible to fix. Don’t save £1,000 and lose £100,000 in impact.
• Choosing the wrong trustees. Your cousin who’s always broke? Not a good choice. Pick people who are financially responsible and care about your cause.
• Being too vague. “Help the community” isn’t enough. OSCR will reject it. Be specific.
• Forgetting taxes. If you give shares or property, you might owe capital gains tax. Talk to an accountant.
• Not reviewing the trust. Needs change. A trust set up in 2015 for youth sports might need to shift focus after the pandemic. You can amend it-but only if the deed allows it.

Final Thoughts: Is It Right for You?

Creating a charitable trust isn’t about being rich. It’s about being intentional. It’s about asking: What kind of world do I want to leave behind?

If you have a cause that matters deeply to you, and you have the resources to support it long-term, then yes-you should consider it.

If you’re still unsure, start small. Talk to a solicitor who specialises in charitable law. Ask your local community foundation for advice. Visit OSCR’s website. Read the guidelines. Don’t rush.

Because the right trust doesn’t just give money. It gives meaning. And that lasts longer than any cheque ever could.

If you’re serious about making a lasting difference, start by talking to a solicitor who understands charitable law in Scotland. Bring your ideas, your numbers, and your questions. Don’t wait until it’s too late.