The case for setting up a named fund over setting up a new charity
When a client wants to give meaningfully and in perpetuity, a named fund held within a community foundation can offer a simpler, more effective route than establishing a standalone charitable trust.
Solicitors advising clients on legacy giving will frequently encounter the question: how do I ensure my charitable wishes are fulfilled effectively, without creating an administrative burden? For clients who want to leave a personal legacy, a private charitable trust has long been the natural answer. But it comes with a cost: registration, trustee appointments, ongoing governance and audit requirements that can make it a significant undertaking. For many, there is a simpler route to the same outcome.
Community foundations like Cambridgeshire Community Foundation, offer donors the ability to establish a named fund within the foundation’s existing charitable structure – carrying many of the hallmarks of a private trust, without the cost, complexity or governance demands that a standalone charity typically entails.
What a named fund provides
A named fund allows a donor – whether an individual, family or business – to earmark capital for charitable purposes under a name of their choosing, define the types of causes or projects they wish to support, and remain as involved or removed from grant-making as they wish.
Funds can be structured as an endowment or a flow-through fund. An endowment invests the capital and distributes annual returns as grants – supporting the local community in perpetuity and accumulating far more in grants over time than the original gift. For clients who want their legacy to keep giving, it is a compelling option. A flow-through fund distributes within a defined period, suiting clients who may want to respond to a specific need or crisis, for example. Hybrid structures, combining elements of both, also exist.
To illustrate the long-term impact: an endowed gift not only provides annual grant funding but also has the potential to preserve – and in many cases grow – the original capital over time, depending on investment performance. This allows the fund to generate cumulative charitable benefit well in excess of the initial donation
The practical advantages
Setting up a new charity typically involves Charity Commission registration, appointing trustees, legal fees, and annual audit costs. By contrast, a named fund can be established quickly through a simple fund agreement.
The foundation also assumes all legal and fiscal responsibility – handling financial administration, reporting, due diligence on grant applicants, and investment management – all for a straightforward and transparent charitable contribution to costs.
Working with Cambridgeshire Community Foundation
Cambridgeshire Community Foundation has been connecting donors with community needs across the county for 22 years. The team has experience working alongside solicitors and financial advisers at every stage of the process – from initial conversations about fund structure and tax efficiency, through to long-term stewardship of a client’s philanthropic legacy.
We are happy to meet with advisers and their clients to talk through the options, without obligation.
Driven by a passion for supporting care leavers, Alex Reid worked with us to establish the Outlook Fund in 2011. Read more about Alex’s journey.
