What are grant making trusts?

With so much of our content focusing on trusts and foundations (including our online training for people who are new to trust fundraising), I thought it might be wise to go back to basics and to give an introduction to grant making trusts.

I don’t want to assume that our readers have the fundamentals at their fingertips (although I know that so many do) so here’s a quick LarkOwl style beginners guide*:

*If you’re not a beginner, feel free to send this onto a colleague who might appreciate a deeper insight into what you do…

What is a grant making trust?

Grant making trusts / charitable trusts / foundations are charities which are set up for the primary purpose of giving money away to other charities.

They do not directly serve beneficiaries.  Rather they act as enablers by giving grants (and occasionally professional advice and support and networking opportunities).

How many grant making trusts are there in the UK?

According to this article (about the numbers of new trusts registered in the UK in 2020), there are over 61,000 grant making trusts registered with the Charity Commission. It is thought that only around 8,000 of these are active in distributing grants to organisations (many prefer to support individuals), giving away a total of £8bn.

Many serve purposes in addition to making grants (e.g. looking after a local heritage asset or running a school) and grant making is a subsidiary activity (#sidehustle!).

Charitable trusts are a diverse bunch.  Like service delivery charities, they are governed by a board of trustees.  They veer wildly in personality, size, constitution, operations and encompass everything from:

• large, long-established organisations with a systematic and transparent approach to grant making

and

• small family trusts where the founder is involved and decisions are made according to the personal preferences of the trustees.

Navigating this variance is all part of the fun and the challenge in a trust fundraisers’ work.

Why do grant making trusts exist?

There are many reasons as to why a grant making trust might be established including:

• a tax efficient way for an individual or a company to distribute excess wealth
• a long-lasting legacy after an individual’s death (whereby funds from their estate are used to endow a charitable trust)
• established in memory of someone who has died (often, funds are raised through events)
• a place where profits from a company are diverted before being distributed to good causes (sometimes known as a ‘corporate foundation’)
• the result of large scale, public fundraising events (for example, Children in Need, Comic Relief)

Where does the money come from?

Most trusts are set up with an endowment payment and / or regular top up payments.  Each year, the interest generated through this investment is given away in grants.

Sometimes a charitable trust might choose to spend some of its capital on top of its interest, giving away even more than it would if it were to just spend the interest – many trusts did this during 2020/21 to support charities navigating the Covid-19 pandemic.

Some don’t have an endowment and simply raise and spend roughly equal amounts each year.

If trustees decide to close a charitable trust, they will give the capital away, sometimes over a set time period.  This is called ‘spending out’ and is not rare.  Trusts which give away three or four figure sums are suddenly able to give away much larger amounts in one off, final sums.

This is a good reason for nurturing an spending time developing relationships with funders who give smaller amounts.

Not to be confused with…

Many fundraising professionals often refer to ‘high value’ fundraising.

This typically means areas of fundraising where you have a small number of donors giving large amounts.  Grant making trusts are included in this category.

Other sources include:

• statutory / grants: money which has been allocated by government for open tender in order to fulfil certain policy objectives
• individuals who make gifts directly
• companies who give from profits

Unlike those above, grant making trusts exist for the primary purpose of giving money away.

They are more philanthropic in culture than the other high value sources above (though of course there are exceptions).

Because of this, they are often seen as a better bet than other sources of funding.  UK benchmarking of fundraising suggests that fundraising from trusts and foundations can deliver a much higher return on investment than other types of fundraising.