Introduction

Non-charitable purpose trusts represent a unique and strategic estate planning tool, allowing settlors to achieve specific goals that do not necessarily align with traditional beneficiary structures. Unlike conventional trusts that benefit individual beneficiaries, or charitable trusts aimed at advancing public welfare, non-charitable purpose trusts serve tailored and often private purposes without direct public benefit. This comprehensive guide discusses the distinct characteristics, advantages, and considerations associated with non-charitable purpose trusts, especially in the context of international estate planning, and presents a comparative analysis of popular jurisdictions to establish a non-charitable purpose trust.

What are Non-charitable Purpose Trusts? 

A non-charitable purpose trusts is a type of trust set up to achieve specific purposes rather than to benefit individual beneficiaries. Unlike charitable trusts, which aim to advance broader beneficial objectives such as alleviating poverty, promoting education, or advancing religion, non-charitable purpose trusts serve more specific, private purposes. Examples of non-charitable purpose trusts include trusts established to maintain grave sites, tombs, and monuments, to perform religious services, or to care for animals. They can also be used in financial contexts for purposes like “off-balance sheet” financing and estate planning, or other business-related objectives, where the trust’s operation doesn’t directly benefit the public but serves a specific lawful purpose.

How are Non-charitable Purpose Trusts Different: Comparing Traditional, Charitable and Non-charitable Purpose Trusts

Feature	Non-Charitable Purpose Trusts	Traditional Trusts	Charitable Trusts
Primary Focus	Typically, does not have human beneficiaries; the focus is on the trust’s purpose itself.	Established to provide financial or other benefits to named individual beneficiaries (e.g., family members).	Aimed at supporting broader societal benefits such as education, poverty relief, or other recognised charitable activities.
Beneficiaries	Typically, it does not have human beneficiaries; the focus is on the trust’s purpose itself.	Has one or more specific individuals or groups who are entitled to the trust’s assets or income.	The public at large benefits indirectly through the charitable activities supported by the trust; there are no direct beneficiaries.
Duration	Can last indefinitely, especially in jurisdictions that have modified traditional constraints like the Rule Against Perpetuities, to continue fulfilling its purpose.	Duration is often limited by the lifespan of the beneficiaries or a set term (e.g., 21 years).	Often established to continue in perpetuity, as long as the charitable purpose can be maintained and remains relevant.
Enforcement	Lacks traditional beneficiaries to enforce terms, requiring an appointed “enforcer” or a court appointment to oversee trust adherence.	Direct beneficiaries have legal standing to enforce compliance with the trust terms and protect their interests.	Oversight is typically governmental to ensure the trust serves the public interest and adheres to charitable trust laws.
Tax Treatment	Generally taxed under the same principles as traditional trusts; does not qualify for charitable tax exemptions or deductions.	Subject to estate and income taxes, depending on structure (e.g., grantor or non-grantor trust).	Benefits from tax-exempt status; contributions by donors can be tax-deductible, significantly influencing fundraising and operational efficiency.
Regulatory Oversight	Oversight is less stringent and typically not subject to special regulatory scrutiny unless the trust’s purpose affects public interests.	Governed by standard trust and estate laws, with fiduciary responsibilities enforced by courts.	Subject to rigorous scrutiny to ensure compliance with charitable purposes and use of funds; regulatory oversight aims to protect public interest.

Benefits of Using Non-charitable Purpose Trusts for International Estate Planning

Non-charitable purpose trusts offer several advantages for international estate planning:

• Purpose-Specific Planning: They are ideal for specific, non-beneficiary related goals such as maintaining family estates, caring for pets post-mortem, preserving art collections, or maintaining grave sites. These trusts cater to personal or sentimental objectives that do not necessarily benefit direct beneficiaries.
• Flexibility in Asset Management: These trusts provide a structured way to manage and preserve unique, indivisible assets like large properties or valuable collections, ensuring management aligns with the settlor’s specific directives.
• Longevity and Perpetuity: In jurisdictions that permit, these trusts can be established to last indefinitely, ensuring the settlor’s intentions are executed over generations, which is especially useful for ongoing goals like asset preservation.
• Enforcement of Settlor’s Wishes: Non-charitable purpose trusts often involve an enforcer who ensures the trust’s purpose is faithfully executed, crucial where traditional beneficiary oversight is unfeasible.
• Legal Protection of Assets: These trusts can offer protection from creditors and are not subject to division in divorce proceedings, securing assets against external claims.
• Avoids Family Conflict: By designating specific assets to fulfil particular purposes, these trusts can reduce potential disputes among family members over asset distribution or usage, which can otherwise lead to a family provision claim.
• Continuity and Stability: For assets needing ongoing management or maintenance, such as real estate or businesses, these trusts provide a stable management framework that may extend beyond the capabilities of individual caretakers or family generations.
• Customisation: They allow for significant customisation in handling and terms, enabling the settlor to tailor the trust to meet very specific conditions and needs.
• Tax Considerations: Though they do not typically offer the tax advantages of charitable trusts, non-charitable purpose trusts can still be structured to optimise tax impacts, depending on whether they are structured as grantor or non-grantor trusts.

These benefits make non-charitable purpose trusts a versatile and powerful tool in international estate planning, providing long-term, specific solutions for managing and preserving assets according to the settlor’s unique intentions.

Drawbacks of Using Non-charitable Purpose Trusts for International Estate Planning

Using non-charitable purpose trusts for international estate planning can involve several potential drawbacks:

• Complexity and Cost: These trusts can be complex to set up and manage, often requiring specialised legal advice to navigate various international laws and regulations. This complexity can lead to higher initial and ongoing costs, especially if the trust requires the management by professional trustees.
• Regulatory Uncertainty: Legal recognition and treatment of non-charitable purpose trusts can vary widely between jurisdictions. Issues such as enforceability and limitations on the trust’s duration due to rules like the Rule Against Perpetuities can create uncertainty about the trust’s long-term viability.
• Limited Tax Benefits: Non-charitable purpose trusts typically do not qualify for the tax exemptions and deductions that are available to charitable trusts. This lack of tax benefits can result in higher tax liabilities for both the trust and the settlor, impacting income taxes on earnings and estate taxes on transferred assets.
• Difficulty in Enforcement: With no human beneficiaries to ensure the trust’s purpose is being fulfilled, these trusts can face enforcement challenges. The effectiveness of mechanisms like enforcers depends heavily on their diligence and the clarity of the trust’s terms.
• Potential for Abuse: The absence of direct beneficiaries overseeing the trust opens possibilities for trustees or enforcers to potentially mismanage or misappropriate trust assets unless the trust is subject to stringent controls and oversight.
• Risk of Obsolescence: Trusts designed to last indefinitely may face challenges if the purpose for which they were established becomes outdated due to societal, legal, or technological changes. Modifying the trust to adapt to such changes might not be straightforward.
• Challenges in Drafting: Clearly and precisely defining the purpose of a non-charitable trust in legal terms can be difficult. Ambiguities in trust documentation can complicate its administration and enforcement, potentially leading to disputes.
• Creditor Claims and Litigation: Despite the protection typically afforded by trusts, assets within non-charitable purpose trusts might still be vulnerable to claims by creditors, especially if the trust is perceived as a method to shield assets fraudulently.

These challenges underscore the need for careful planning and legal guidance when considering the establishment of a non-charitable purpose trust for estate planning purposes.

Where to Establish Non-charitable Purpose Trust? Comparative Analysis of Popular Jurisdictions.

Jurisdiction	Applicable Law	Pros	Cons
Seychelles	Trusts Act, 2021	Flexibility in Purpose: Allows a broad range of purposes, accommodating various settlor intentions without stringent restrictions. Perpetual Duration: The legal framework permits these trusts to exist indefinitely, ideal for ongoing purposes without a predetermined end date.	Limited Precedents: Fewer court cases and legal interpretations to guide trustees, which can lead to uncertainties. Increased Regulatory Scrutiny: Recent laws, including the Trust (Amendment) Act, 2022, and the Beneficial Ownership (Amendment) Act 2025, have increased transparency requirements to align with international standards, adding to the compliance duties for trustees.
British Virgin Islands (BVI)	Trustee Act, 1961 (S. 84A)	Established Framework for Non-Charitable Trusts: Clearly defined laws support the creation and operation of non-charitable purpose trusts, ensuring legal certainty. International Recognition: BVI’s strong reputation enhances the trustworthiness and reliability of trusts established here. Perpetual Duration: The applicable law permits trusts to last indefinitely, which is ideal for long-term, generational planning.	Economic Substance Requirements: Recent legal changes require some entities to demonstrate substantial economic presence, complicating some trust structures. Regulatory Scrutiny: High level of international scrutiny affects privacy and exposes trusts to global regulatory trends, with recent updates like the Anti-Money Laundering (Amendment) Regulations, 2025, along with the Anti-Money Laundering and Terrorist Financing (Amendment) Code of Practice, 2024, increasing compliance duties for trustees.
Guernsey	Trusts (Guernsey) Law, 2007 (S. 12)	Specific Provisions for Non-Charitable Trusts: Guernsey’s trust laws are explicitly designed to support innovative non-charitable trust structures. Perpetual Duration: Guernsey law permits trusts to last indefinitely, which is ideal for long-term, generational planning. Legal Certainty: A significant 2024 court decision, BX v T GRC [2024] GRC 036, has reinforced the stability of these trusts by making it very difficult for individuals who are not named beneficiaries to challenge the trustee, reducing the risk of disputes.	Cost and Complexity: High standards and comprehensive regulatory requirements make trust management potentially costly and administratively complex.
Jersey	Trust Law 1984 (Articles 12 to 14)	Legal Support for Non-Charitable Trusts: Comprehensive legal provisions back the establishment and maintenance of these trusts. Flexibility and Innovation: Jersey is known for allowing significant leeway in trust structuring, facilitating tailored solutions. Perpetual Duration: The applicable law permits trusts to last indefinitely, which is ideal for long-term, generational planning.	Costly Jurisdiction: The high cost of professional services may deter smaller trusts or those with limited assets. Potential for Litigation: A 2024 court decision, Judge v CSC [2024] JRC233, has suggested that a wider range of individuals (even those not yet formally named as beneficiaries) may be able to bring claims against a trustee, potentially increasing the risk of legal disputes.
Labuan	Labuan Trusts Act, 1996 (SS. 11A & 11C)	Attractive for Asian Settlors: Its geographical and economic positioning makes it especially suitable for investors from Asia looking to establish trusts. Perpetual Duration: The applicable law permits trusts to last indefinitely, which is ideal for long-term, generational planning.	Reduced Confidentiality and Increased Compliance: The Labuan Trusts (Amendment) Act 2025 introduced a mandatory register of beneficial owners. This significantly reduces the level of privacy previously available and increases the administrative and compliance duties for trustees. Less Established Legal System: While flexible, Labuan’s legal framework is not as globally recognised, which might affect the perceived security and robustness of trusts under international scrutiny.

Using Non-charitable Purpose Trusts for Digital Assets

The rapid growth of assets like cryptocurrencies and non-fungible tokens (NFTs) presents a unique challenge for digital asset international estate planning. A non-charitable purpose trust can be specifically designed for the purpose of holding, managing, and securely transitioning a portfolio of digital assets. This structure offers key advantages:  

• Ensuring Access and Control: The trust, not an individual, legally owns the assets. The trust document can outline secure protocols for managing private keys and access credentials, preventing assets from being lost upon the owner’s death or incapacity.  
• Expert Management: The trust can be drafted to empower the trustee to hire specialists in digital asset custody, cybersecurity, and investment, ensuring the portfolio is managed by experts in this fast-evolving field.
• Asset Protection: Placing digital assets, which are considered property by tax authorities, into an irrevocable purpose trust can shield them from future creditor claims against the settlor.  

Non-charitable Purpose Trusts and Private Trust Companies

For high-net-worth families, maintaining control and ensuring smooth succession often involves creating a Private Trust Company (PTC) to act as a dedicated trustee for their family trusts. A non-charitable purpose trust is the ideal tool to own the shares of the PTC itself.  

This creates an “orphan” structure where the ownership of the PTC is held by the purpose trust, not by any individual family member. The purpose of this trust is simply to hold the PTC shares. This structure provides two main benefits:

• Asset Protection: It legally separates control of the family’s entire trust structure from any individual’s personal estate, protecting it from personal creditors, divorce proceedings, or estate taxes.
• Continuity: It ensures that the governance of the family’s wealth continues seamlessly across generations, as the ownership structure does not depend on the lifespan of any single person.  

Conclusion

Non-charitable purpose trusts offer a versatile and effective means for asset management and estate planning across borders. They provide substantial benefits such as asset protection, continuity in asset management, and flexibility in meeting the specific intentions of the settlor.

However, the complexity and potential drawbacks highlight the importance of careful planning and expert legal guidance. For individuals or families exploring the possibilities of setting up a non-charitable purpose trust, contact the international estate planning and trust lawyers at PBL Law Group for help.

Frequently Asked Questions (FAQ)