In October 2006, the Bill & Melinda Gates Foundation was split into two entities: the Foundation and the Trust. The Foundation’s Trust consists of an asset management fund that donates part of its income to the foundation, which can thus support certain entities chosen by it.
The Bill & Melinda Gates Foundation explains on its institutional website that, in 2006, two entities were created: the Bill & Melinda Gates Foundation (foundation) and the Bill & Melinda Gates Foundation Trust (trust).
The Bill & Melinda Gates Foundation provides financial support through grants and programs, which, according to them, “focus on improving health and alleviating extreme poverty”. To maintain its charitable foundation status, the Foundation must donate funds equivalent to at least 5% of its assets each year.
On the other hand, we have the Bill & Melinda Gates Foundation Trust (a trust or trust fund), which manages the various assets transferred to its management by Bill and Melinda Gates, Warren Buffet, among others. The organization claims to manage “investment assets and transfer proceeds to the foundation as needed to achieve the foundation’s charitable objectives.”
How do trust funds work and what do they consist of?
A Trust is a legal entity that can hold assets on behalf of someone or a group.
The person or group (grantor, trustee) that is creating a Trust chooses the rules and decides what assets the fund will manage.
The fiduciary (trustee) is the person or entity that intends to manage the assets and fulfill the various responsibilities. This entity or person does not actually own the assets of the trust (Trust), but supervises their distribution to the beneficiaries and must make sure that the stipulation is being followed. In many cases, the trustee receives some form of compensation for the effort, such as a management fee.
How does the Foundation Trust model work?
There are some trust models, but according to Hess-Verdon – A Professional Law Corporation, the Bill & Melinda Gates Foundation uses the Charitable Remnant Trust (CRT) model.
In a Charitable Remaining Trust (CRT), a person or organization contributes to charity while receiving the proceeds for themselves or a beneficiary.
The Trust can be created to pay annuities every year, semiannually, quarterly or monthly. Payment must not exceed 50% of the account’s assets each year, but not less than 5%.
Once the beneficiary’s term expires, all Trust assets go to a charity of their choice.
In October 2006, when the Trust was created, the decision was announced that they would spend all of the foundation’s resources within 50 years of Bill and Melinda’s death. In addition, Warren stipulated that the proceeds from the Berkshire Hathaway shares he still owns at the time of his death must be used for philanthropic purposes within 10 years of liquidating his assets.
CRT contributions must go to IRS-approved charities, are irreversible and some of this support is tax deductible.
In short, the Bill & Melinda Gates Foundation Trust consists of an asset management fund that donates part of its income to the foundation, which can thus support certain entities chosen by it.
What can a Trust Fund hold?
Trusts can hold various types of assets: from cash, stocks, real estate and even works of art. They can even contain entire businesses.
Putting money in a trust fund allows an entity or person to pass ownership to someone else in a structured way where they can enforce rules.
Advantages of donations
Through the Trusts it is possible to substantially reduce the tax burden.
Whereas , it is possible to obtain advantages that result from an image associated with causes of charity and that suggest detachment from material goods.
