Starting a trust

As an alternative to incorporation – A non profit organization can also be started as a trust. While trusts are the common structure of Starting a non profit organization in the United Kingdom, they are rarely used in the United States.

In the United states, trusts are more commonly used for Will and estate planning, Employee plans and for personal tax planning. This is becuase the trust laws of most of the states are ill suited for establsihing a non profit organization even though they are relatively easy to set up.

While they are easier to set up, the govering rules/trust laws for most of the states are much more stringent than those applicable to a non profit coporation. For instance, a trustee is not protected from personal liability as is available to members of a corporation.

A Trust is suitableĀ  if a non profit is established solely for the purpose of adminstering the property of the ‘settlor’ which is proposed to be managed by other individual(or group of individuals) as its trustee (s).

If your organization falls into this category, you can as well consider forming a trust, even though similar effects can be acheived by incorporation as well.

If you decide to set up a trust, you will have to execute a ‘trust agrrement’ (also called ‘trust deed’ or a ‘declaration of trust’). In most of the states a trust can be formed by a single trustee. The trust can also adopt by laws like corporations.