Client Affairs

Charities Find Support To Repurpose Dormant Trusts

Jackie Bennion Deputy Editor 2 September 2021

Charities Find Support To Repurpose Dormant Trusts

No-one likes funds sitting idle, and the UK Charity Commission has identified a large pot of money sitting in abandoned trusts it wants funnelled back into communities that need it most. Wealth managers are a critical link.

When the Charity Commission began the Revitalising Trusts Programme in 2018, it discovered that roughly 5,000 UK registered charitable trusts were potentially either inactive or ineffective and sitting on unused income of around £1.4 billion.

In its first two years, the programme has unlocked £32 million from these dormant trusts, including channelling funds to support early community responses to the pandemic.

To help revive the idle capital, the regulator chose to work with the UK Community Foundations (UKCF), a network of charities and organisations ideally placed to help guide trustees and financial advisors on what to do with the funds.  

The programme gives struggling trustees several options: transfer the dormant assets to another charity; close down or wind up the trust; or change its purpose to make it work more effectively, Laura Cameron Long, revitalising trusts manager at UKCF, said.

Trusts can languish for a number of reasons. Some struggle to find new trustees or identify beneficiaries. Trustees lack the time to run the charity or its original purpose has become outdated or too restrictive.

"Some trusts were set up hundreds of years ago to provide meat, bread and coal for the poor or support women of disrepute or were established in poor areas that have long since become affluent," thwarting their original purpose, Cameron Long said.

Another common cause of dormancy is when trustees find managing the trust and annual reporting too much of a burden, she said.

“We work very much in partnership with the Charity Commission, which identifies dormant assets based on trusts that have spent no money or less than 30 per cent of their income in the last five years.”

If a trust meets this criteria, the Commission makes contact and details of the charity are passed on to UKCF. “The idea is that the Charity Commission gives these trusts a nudge, asking, ‘Do you need a bit of support as this money needs to be spent?’” Cameron Long, said.

“The work we do is really to encourage trustees either to revitalise these trusts themselves and get that money back out into the network, which is something they may not know how to do. Or they may think, we are done with this, so let’s transfer it over to another charity or to one of the community foundations.”

Around 45 accredited foundations across the UK make up membership of UKCF, which distributes approximately £100 million annually in grants. During the 2020 pandemic year that figure rose to around £190 million.

Conversations with wealth managers are around making sure that everyone understands that revitalising a trust is often a simple process.

“A lot of the time people don’t realise that,” she said. “They think it starts to get legal and costly when solicitors are involved. This can be the case for a very large trust. But for the majority, because of the existing relationship with the network and the fact the Charity Commission is very keen to get this money flowing again, they have simplified the process to make it as easy as possible for this money to be spent again.”

Most of the time when speaking to trustees, “they know exactly where they want the money to go and it is a matter of supporting them through that process,” she said.

Since the programme was launched, the group has worked with more than 1,800 charities to revive dormant funds. Following a successful rollout in England, the Commission has launched the initiative in Wales, where it plans to contact around 200 charities and release a targeted £25 million in idle accounts.

Cameron Long says her network dedicates time connecting with professional advisors, who she believes are key to the future success of the programme.

While many trustees have longstanding relationships with their financial advisors, others are new to it. Consequently, it is important for professional advisors to let trustees who may be struggling to manage their trusts know that there is support, she said.

The Commission urges investment advisors and wealth managers to take the time to consult on its guidance in the area.

“It’s important to understand what makes a charity inactive or ineffective and be able to recognise when a registered grant making trust with charitable status is at a point where it can no longer continue without the need for a change, such as amending its charitable purposes,” the Commission told this service.

“This is vital in enabling charitable trusts to get the assistance they need to get up and running again or so that funds currently lying idle in accounts can be transferred to best help active charities and those they benefit,” the Commission said.

Camernon Long says her network has seen positive results with wealth managers because they are a trusted body.

“Managers are able to say, ‘I know this is a good organisation and a good thing for you to do. If you don’t want to look after this money anymore and want it spent on good causes, I can recommend it.'”

“And it does come down to knowing that these assets will be well managed and spent where they should be,” she said.  

An important decision in succession planning is whether trustees want the money spent down and designated to a local charity or given to a foundation to be invested and income spent on long-term projects.

“The nature of the trust world is that people generally want that money to carry on,” she said.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes