What Can You Do With a Charitable Trust? Practical Uses and Real-World Examples
Charitable Trust Calculator
Calculate how your charitable trust could benefit both your family and the causes you care about. Enter your asset details and see potential tax savings and income.
Key Benefits:
• Avoid capital gains tax on appreciated assets
• Reduce your income tax liability
• Generate income while supporting your cause
Example: A $500,000 property in a CRT could provide $20,000 annual income to you for life, then go to charity. You avoid capital gains tax and get a $500,000 tax deduction.
Most people think a charitable trust is just a fancy way to give money to charity. But if you’ve ever wondered what you can actually do with a charitable trust, the answer goes way beyond writing a check. It’s a legal tool that lets you shape how your generosity works - now and long after you’re gone. You’re not just giving money. You’re building something that outlasts you.
Support Causes That Matter, Forever
A charitable trust lets you pick exactly what you want to support - and make sure it stays supported. Maybe you care deeply about animal rescue in rural areas. Or youth mentoring in South Auckland. Or protecting native kauri trees in Northland. A charitable trust lets you lock that cause into place.
Unlike a one-time donation, a trust can generate income forever. Say you put $500,000 into a trust. The trust invests that money. Each year, it uses, say, 4% - $20,000 - to fund your chosen cause. The rest stays invested. That means your gift keeps giving, year after year, even if inflation rises or donations dry up.
Real example: A retired teacher in Tauranga set up a trust to fund free after-school tutoring for Māori students. Twenty years later, the trust still pays for tutors, books, and transport. She passed away in 2018. The kids are still being helped.
Give While You’re Still Alive - or After You’re Gone
You don’t have to wait until you die to use a charitable trust. There are two main types:
- Charitable Remainder Trust (CRT): You put assets in now. You (or someone you name) get income from it for life. When you pass, the rest goes to charity.
- Charitable Lead Trust (CLT): The charity gets income first. After a set time - say 10 or 20 years - what’s left goes to your family.
If you’re in your 50s or 60s and want to reduce your tax bill while still living comfortably, a CRT can be powerful. You get an immediate tax deduction for the value of the gift to charity. Plus, if you put in appreciated stocks or property, you avoid capital gains tax when the trust sells them.
One Auckland couple put their beachside bach into a CRT. They kept living there and got monthly payments. When they passed, the bach was sold. The $1.2 million went to a local marine conservation group. They saved $180,000 in capital gains tax and kept their lifestyle.
Control How Your Money Is Used - No Guesswork
Ever donated to a big charity and wondered if your money actually helped? With a charitable trust, you write the rules. You decide:
- Which organizations get the money
- How often payments are made
- What projects are funded
- Whether funds go to general operations or specific programs
You can even say: “Only fund mental health services for Māori youth under 25.” Or: “Support environmental education in schools with over 40% Pacific Island enrollment.” That level of control isn’t possible with a standard donation.
Some people set up trusts to support multiple causes. One trust in Wellington gives 60% to food banks, 30% to homeless youth shelters, and 10% to animal welfare. The trustees - usually family or close friends - review applications each year and decide who gets what.
Leave a Legacy That Reflects Your Values
A charitable trust is one of the clearest ways to say: “This is who I was. This is what I cared about.”
It’s not about fame. It’s about continuity. A trust can carry your name, your family’s name, or even a loved one’s name - like “The Margaret Lin Trust for Literacy.”
Many people use it to honor a parent, partner, or child who passed. One man in Christchurch created a trust in his daughter’s name after she died of cancer. It funds free cancer support groups in small towns. Every year, they hold a small ceremony. The trust pays for the venue, the speakers, the tea. It’s quiet. It’s personal. And it’s still going strong after 12 years.
Use Assets You Can’t Easily Donate
You don’t need cash to start a charitable trust. You can use:
- Real estate - houses, land, commercial buildings
- Shares in private companies
- Art, collectibles, or valuable vehicles
- Retirement accounts (like KiwiSaver or superannuation funds)
These are hard to donate directly to charities. Most charities can’t manage a rental property or sell a painting. But a trust can. It holds the asset, rents it out, sells it, or lets it grow - then uses the proceeds for good.
One woman in Dunedin left her 1920s heritage home to a charitable trust. The trust restored it, rented out rooms, and used the income to fund scholarships for women studying engineering. The house still stands. The scholarships keep being awarded. The trust handles everything.
Reduce Your Tax Burden - Legally and Smartly
In New Zealand, charitable trusts are tax-exempt. That means:
- Income earned by the trust (rent, dividends, interest) isn’t taxed
- Capital gains from selling assets inside the trust aren’t taxed
- You get a tax deduction when you transfer assets into the trust
The deduction is based on the fair market value of what you give. If you put in a $300,000 property, you can claim that as a deduction on your income tax return - lowering your tax bill that year.
It’s not a loophole. It’s a designed incentive. The government wants you to give. And this is one of the most efficient ways to do it - especially if you own assets that have grown in value.
Work With Trusted People - Not Just Paperwork
A charitable trust needs trustees. These are the people who manage it. You choose them. They can be:
- Family members
- Friends
- A professional trustee company
- A combination
Most people start with family. But if the trust is complex - say, it holds commercial property or manages investments - you might add a professional trustee. They handle the legal stuff, accounting, and compliance. That costs money, but it removes stress.
One rule: Never name just one trustee. Always have at least two. If one dies or can’t act, the other keeps things running. No delays. No frozen assets.
It’s Not Just for the Wealthy
You don’t need millions to start a charitable trust. You need intention.
Some people start with $50,000. Others use life insurance policies. One Auckland mum named her trust after her son, who loved libraries. She named the trust “The Liam Reading Fund.” She put in $75,000 from her life insurance payout. That’s enough to give $3,000 a year to local schools for new books.
Even small trusts can make a real difference. They’re often more flexible than big charities. They can fund one-off projects, pilot programs, or urgent needs that bigger organizations overlook.
What Happens If the Charity Changes?
What if the charity you chose closes down? Or shifts focus? You can plan for that.
When you set up the trust, you can name backup charities. Or give trustees the power to choose a new one - as long as it matches your original purpose. For example: “If the Pacific Youth Foundation no longer exists, funds shall go to another organization supporting Pacific Island youth in education.”
This flexibility keeps your gift alive. It doesn’t die with the first charity.
Getting Started Is Simpler Than You Think
You don’t need a lawyer to start thinking about it. But you do need clarity:
- What cause do you want to support? Be specific.
- How much can you give? Cash? Property? Other assets?
- Who will manage it? Family? Professional?
- Do you want income for yourself first? Or all of it to go to charity?
After that, contact a lawyer who specializes in trusts. Or talk to a trust company like the New Zealand Trustee Services. They’ll help you draft the deed - the legal document that sets everything in motion.
The cost? Around $2,000-$5,000 to set up. But that’s a one-time fee. The trust lasts forever.
It’s Not About Leaving Money Behind - It’s About Leaving Purpose Behind
A charitable trust isn’t a tax trick. It’s not just estate planning. It’s a way to say: “My life mattered. My values mattered. And they’ll keep mattering.”
Whether you’re giving $10,000 or $1 million, the effect is the same. You’re not just helping people today. You’re making sure someone else will help tomorrow. And the next day. And the next.
