Phil Rees
Share this content

Question about a family trust

Question about a family trust

Client's father (now deceased) set up a trust in 1978 for charitable purposes . Trust deed permits excess funds to be held in investments "authorised by law for the investment of trust funds". It already holds a few shares in the family company and receives dividends. My question is: can it make a commercial loan to the family company? The family company's business is that of a commercial landlord, owning properties worth in excess of £1,000,000 (fully tenanted). The proposed loan is £20,000.


Please login or register to join the discussion.

05th Sep 2011 16:53


It is a charity, i.e. a trust established for charitable purposes only?

What happens to the dividends? Shouldn't they be applied solely for a charitable purpose?

Is this a discretionary trust?

Thanks (0)
05th Sep 2011 17:01

they are
yesthey areno


Thanks (0)
to FirstTab
05th Sep 2011 17:11


This should tell you what you need to know. Prudence is the name of the game:




Thanks (0)
05th Sep 2011 18:24

What kind of trust

Being established as a trust for charitable purposes is not the same as being a charity. Nor is making a loan to the family company making an investment, as I cannot see that it would be an investment "authorised by law for the investment of trust funds". 

I have acted for Trusts set up for charitable purposes before, and they have had to be discretionary trusts as they had to be able to chose who and when to make the donations to. They had to have the power to not distribute until suitable requests for qualifying donations were received which may well not be in the year of the income receipt.

The trust deed may say whether the Trustees have the powers to lend in these circumstances

Thanks (1)
05th Sep 2011 18:35

"Being established as a trust

"Being established as a trust for charitable purposes is not the same as being a charity."

I'll qualify this statement - if the trust is established solely for charitable purposes, then it is a charity (s1 Charities Act 2006). 

That's why I asked whether it has been established for charitable purposes only.

Trustees investment powers tend to be quite wide.




Thanks (1)
06th Sep 2011 12:11

It is solely for charitable purposes

but not a charitable purpose that many people would consider to be mainstream.

Thanks (0)
Share this content