Charitable Trusts

Charitable Trusts

 Charitable trusts are often formed in the memory of a departed or because of a passionate commitment to to a cause or charity. They are easy to create, and the form for such a trust can be found on the IRS website at https://www.irs.gov/charities-non-profits/charitable-organizations/charity-sample-organizing-documents-draft-b-declaration-of-trust

Charitable Trusts are governed under Article 8 of New York’s Estate, Powers & Trusts Law (EPTL). When establishing a charitable trust under New York law, the same rules apply as when creating any other lifetime trust the signatures of the creator and one of the trustees, (which can be the same person) all of which are witnessed by two individuals or notarized.

A Charitable Trust can have several broad charitable purposes (e.g., religious, charitable, educational, or benevolent purposes) and could use Section 501(c)(3)’s tax exempt language alone as the description of the purposes. A trust only needs one trustee and  can always allow for additional trustees to be appointed at a later date.

There are no requirements for a trust’s name. It can be named after the person who has passed or just “the Increasing Prosperity Trust,” It does not need consent of any New York governmental agency to be established such as the Department of Education or the Department of Health, except it must register with the New York Charities Bureau the same as a charitable corporation.

Trustees are entitled to compensation for the work they put in managing the trust. Under New York’s Surrogate’s Court Procedure Act, trustee compensation is limited to six percent (6%) of income and none of the principal of the trust. Charitable trusts can be subject to. “Unrelated business taxable income” at tax rate is 39.6%. It should always be remembered that trustees have a duty to act in the best interest of the trust and as a “prudent investor”.