Charitable Trust and Family Inheritance

Charitable Trust and Family Inheritance


Gao Mingyue is a lawyer and partner at Guantao (Shanghai) Law Firm who is committed to the practice of family law, trust law and charity law. He is skilled at integrating family agreements, trust structures and charity structures to establish a systematic and comprehensive legal framework of wealth inheritance for family clients. Mr. Gao is the founder of several foundations and NGOs, and also provides continual legal counseling to a number of banks, insurance and trust companies. Mr. Gao is the founder of the first charitable trust “Charitable Trust Aided by Lawyer Mingyue”, which was initiated by lawyers in China.

Main body:

In recent years, private wealth management practitioners have often encountered clients’ philanthropic appeals when planning asset allocation and wealth inheritance for wealthy clients. Some clients are long-term thinkers and want to learn from the Rockefeller Foundation’s model, and intend to conduct localized charity trials by setting up philanthropic foundations. Some clients’ kind-heartedness has begun to blossom, but they are just getting started and still staying at the level of simple fund donations. There is still a need for guidance. In the overall structure of wealth protection and inheritance planning, how to graft charitable genes from different people and adapt to local conditions in order to enhance the spiritual and cultural connotation of family inheritance has become an important factor in evaluating the integrity of wealth inheritance programs. It has also become an indispensable skill for the advancement of practitioners’ business.

At the level of legal tools, charitable foundations and charitable trusts are the two most important tools when designing a charity structure for family wealth management. This article will focus on the legal structure of charitable trusts and the practice of private wealth protection and inheritance.

Charitable Trust 1.0 model

The concept of a charitable trust is determined by the Charity Law (effective September 1, 2016). Prior to this, it was the charitable trust model under the Trust Law (October 1, 2001). In this period of charitable trusts, the use of trust tools for charity has enabled the realization of “value preservation” and “charitable wishes”, and it can also be sustainable and has already shown great advantages.

For example, if you decide to donate five million yuan to a charity organization and agree to allocate 500,000 yuan each year to charity, then this kind of charity can only continue for 10 years. If this five million yuan is used to set up a charitable trust and the proceeds are allocated every year to charity, the charity at the heart of this can be extended for a long time.

In fact, the number of charitable trusts under the Trust Law which have been put into practice is relatively small, and their scale is not large either because the various supporting systems are immature. For trust companies as trustees, because of the lower management fees, high investment, and debate over whether funds can be publicly raised, they remain controversial, and are generally not willing to promote charitable trusts with great fanfare. Therefore, in the era of charitable trust 1.0, the charity appeal in the context of family wealth inheritance is difficult to achieve through the charitable trust model.


Charitable Trust 2.0 model

Highlight 1: Charitable Organizations Can Become Trustees

The charitable trust 1.0 model under the Trust Law has changed into the charitable trust 2.0 model in the era of the Charity Law. One of the highlights of the model iteration is the expansion of the trustee’s scope. In addition to trust companies, charitable organizations can also become trustees. Three months after the implementation of the Charity Law, the first charitable organization in China serving as a single trustee’s charitable trust (Beijing Entrepreneur Environmental Protection Foundation 2016 Alashan SEE Public Welfare Finance Class Environmental Charitable Trust) was successfully filed. As of October 11, 2018, among the 107 charitable trusts filed on the Charity in China website, charitable organizations acted as trustees in 23 charitable trusts, 16 of which were “double trustees” with trust companies. In the “double trustee” structure, the trust company assumes the responsibility of fund management (to ensure the security and value of the trust property) while the charitable organization plays the role of the actual executor of the charity project.

Reference Law: Article 46 of the Charity Law

   The trustee of a charitable trust may be served by charitable organizations or trust companies as determined by the clients.


Highlight 2: Charitable Trust Embedding Inheritance Structure

In the era of charitable trust 2.0, in addition to the expansion of the scope of trustees, the threshold of charitable trusts has decreased, and the integration of charitable trusts into the family wealth inheritance structure has also become possible.








Xing Chen Charitable Trust                                 Filing No.

Filing Information of Charitable Trust

Transaction Processing and Financial Situation

Inspection and Assessment

Commendation and Punishment

Other Items

Initial Filing Information

Filing Change Information

Filing Termination Information



Filing No.


Name of Charitable Trust

Xingchen Charitable Trust

Trust Purpose

The main purpose of the trust is to effectively use trust funds in charitable ways to promote innovative projects and youth initiatives in education, health care, science and technology.

Time of Filing

December 4, 2017

Filing Period

Permanent survival

Filing Agency

Department of Civil Affairs of Guangdong Province

Zip code




Couple Tu Yexing and Li Meichen


Shenzhen Social Public Welfare Foundation


Xingchen Charitable Trust

From the Charity in China Website:

According to the above chart, the Xingchen Charitable Trust (whose trustee is Shenzhen Social Public Welfare Foundation) successfully received a filing receipt in the Department of Civil Affairs of Guangdong Province. This is also the first time in Guangdong Province that a charitable trust with a charitable organization as the single trustee has passed this filing process. It is reported that the charitable trust was established by the couple Tu Yexing and Li Meichen with an investment of 100,000 yuan in the first phase, and was set up as an open-ended sustainable charitable trust. The purpose of the charitable trust is to promote innovative projects and youth initiatives in the fields of education, medical care, science and technology through charitable funding.

Compared with the 30 million plus custom-made family trust products currently on the market, the threshold for embedding charitable trusts in the family wealth inheritance structure is negligible. An individual with wealth can become a principal, and there is no threshold for the initial investment. The duration of the trust can be open and sustainable. When asking why the water is so clear in the canal, it is because fresh water comes from the springhead. With the use of charitable trust tools, the isolation effect of the trust and the spiritual strength of charity can be fully demonstrated. This small fulcrum of charitable trusts can become an intrinsic source of family wealth, culture and spiritual growth.


Highlight 3: Deep Expansion of Family Philanthropy

The emergence of charitable trusts has led family charity to move beyond the level of funds and property donations, and the flexibility and creativity of trusts has made it possible to deeply expand family charity. Take the first domestic family charitable trust as an example. Its slightly complicated but flexible legal structure allows family members to enter the charity itself.


乐淳家族慈善信托Lechun Family Charitable Trust

The first family charitable trust after the implementation of Charity Law in China

投资组合Investment portfolio  委托人Principal (individual)

成立时间Time of establishment: September 2016   资产配置管理Management of asset allocation

受托人Trustee 万向信托 Wanxiang Trust

公益项目决策  Decision of public welfare project  董事会 Board of Directors

公益事务咨询Consultation on public welfare affairs公益项目初选 Initial selection of public welfare project

公益项目秘书 Secretary of public welfare project  公益项目申请  Application of public welfare project

公益项目申请人 Applicant of public welfare project 受托管理Trusteeship management

投资 Investment 公益项目1 Public welfare project 1教育科研资助Educational research funding

公益项目n  Public welfare project n传统文化保护Traditional cultural protection

委托资金/股权 Entrusted funds/equity资助运作Funding operation受益人1/n  Beneficiary 1/n

各类受助对象 Various types of recipients乐淳家族慈善信托Lechun Family Charitable Trust

法定备案管理Statutory filing management法定信托监察Statutory trust supervision

资金托管管理Fund management备案机构Filing agency杭州市民政局Hangzhou Civil Affairs Bureau

监察人 毕马威Supervisor, KPMG专用专户 Dedicated account商业银行Commercial Bank

乐淳家族慈善信托Lechun Family Charitable Trust


From the Charity in China Website:

In the above diagram, the total size of the trust property is 20 million yuan, and Wanxiang Trust is the trustee which bears the obligation to preserve and increase the value of the assets. At the executive level of charity affairs, the client makes use of the family to inherit wisdom, and establish the structure of a Board of Directors in the charitable trust agreement, allowing family members to drill down into the operation and execution of specific charitable matters. A public welfare project secretary can also be hired to provide professional support.


Highlight 4: The Practice of the Magnate Family Charity: The Dual-Drive Structure of the Charitable Trust + Foundation

The world’s richest man, Bill Gates, adopted this “dual-drive structure of the charitable trust + charitable foundation”. Its operational logic is that the Bill & Melinda Gates Trust Fund is responsible for the management of investment assets, and if necessary, the funds are allocated to the foundation so that it can successfully achieve its charitable goals. Meanwhile, the Bill & Melinda Gates charitable foundation is responsible for the management and operation of charity projects and has the right to ask the foundation for assets for charitable activities.

Since the implementation of the Charity Law in China, the dual-drive structure created by Bill Gates has also been implemented in China. In July 2017, Mr. He Xiangjian, the founder of Midea Group, one of the world’s top 500 companies, announced the “6 billion charitable donation plan”, which was implemented through the dual-drive structure of “Charitable Trust + Charitable Foundation”. The author believes that the dual-drive three-dimensional model of the “family charitable trust + family charitable foundation” will become the mainstream model for wealthy families to contribute to charity. In the dual-drive model, charitable trusts will become a channel and a carrier for ensuring the sustainability of charity. As an important charitable system, charitable foundations will return to their origins, do a good job in the discovery, evaluation, landing, management and supervision of charitable projects, and become the main element for implementing charity.

The Luguanqiu Sannong Fuzhi Fund Charitable Trust, established on June 29, 2018, was a landmark event in the history of the development of charitable trusts in China. The trust was initiated by Mr. Lu Weiding, a second generation descendant of a well-known family company in China, Wanxiang Group, who followed the behest of his father, Mr. Lu Guanqiu. According to the filing information for the charitable trust, the total size of the trust property is “the equity of Wanxiang Sannong Group Co., Ltd. held by the principal (corresponding to a capital contribution of 600 million yuan)”. According to public information, the total shares of the three listed companies (Wanxiang Denong, Chengde Lulu, Hangmin Shares) held by Wanxiang Sannong Group Co., Ltd. have reached several billion yuan, which does not include other assets held by Wanxiang Sannong Group Co., Ltd. The author believes that, using the legal tool of a charitable trust, the inheritance of the family wealth and spirit of the legendary entrepreneur Lu Guanqiu was perfectly realized. It perfectly demonstrates the role of charitable trusts in family inheritance.

In summary, for wealthy families with surplus wealth and kind-heartedness, the establishment of charitable trusts is convenient, the capital threshold is low, the operating costs are low, and the preservation of charitable trusts can be maintained forever, making the advantages extremely attractive. For entrepreneurs with family businesses, charitable trusts are an important tool for establishing an image of family charity and enhancing the cultural esteem of the family. It is also an important way for family businesses to establish charitable brands and fulfill corporate social responsibilities. For ultra-high-net-worth family business owners, family inheritance through charitable trusts is a method for inheritance that is both safe (avoiding disputes) and noble (social respect) and conforms to the developmental trends in Chinese society.



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