The Significance of Charitable Trusts in thePrivate Pursuit of Public Interests
Takeshi Fujitani（University of Tokyo）

This article examines the significance of charitable trusts
as vehicle by which private persons to achieve public interests,
particularly in the Japanese legal system. Since Japanese law alreadyprovides the Public Interest Corporation regime as a legal vehicle forprivately-initiated pursuit of public values, and as there are already anumber of corporations established and operated for public benefits
under such regime, we need to revisit the merits in charitable trust
regime within Japanese law, in addition to its corporate alternative.
The inquiry leads us to ask whether the trust form, in contrast to thecorporate form, exactly addresses the currently-unfulfilled needs ofbenefactors who wish to give away of their property to public virtues;
what of the trust form makes those contributors more satisfied bytheir giving, and how the legal characters of (charitable) trust will
make differences in meeting such needs. In this light, this articleemphasizes that the charitable trust is no less trusts, which has been
by nature a special legal device for a person to dispose of her property
in flexible ways that are not always available by corporate form.
Charitable trust tends to be discussed, particularly in the currently
ongoing process of the legislative amendment of Charitable Trust Act,in the similar vein as we look at its corporate counterpart: that is, how
the law should achieve the adequate governance of charitable trusts.
It is no doubt that governance is the central question in the new― 181 ―信託法研究第42号（2017）

legislation, but we should not overlook the possible legal differences
between charitable trusts and public interest corporations. Otherwise,
what is the point to have the charitable trust regime at all, in addition
to its corporate alternative?
Based on the above-mentioned framework of inquiry, this article
brings up three insights from which I argue we would be able todiscuss our upcoming legislation on the charitable trusts in a moreproductive manner:
First, charitable trust, by virtue of its legal form of trust, provides
the flexibility of property disposition for the public interest that a benefactor
chooses. To visualize the idea, we might be able to conceive “the flow”
of property from the donor’s hand, to a series of interim stages, andeventually to being used up for public interest goals. As opposed tothe outright giving to an existing charitable corporation, a charitable
trust, through its trustee, enables the benefactor to flexibly arrange
the temporal allocation (“the flow”) of her property for public goods as
she wishes. Although she can instead establish a new public interest
corporation, it is usually more expensive and donor’s will tends to besuperseded by the corporate board’s judgments in a long run. The
trust form could give a donor a better sense of control, which would
possibly encourage her to make benefaction. Perhaps a benefactor
wants to give her property right now to charity, but at the same time
feels not yet ready to give up all of it. Instead of splitting the property(that is not always a practical option), she can set up a split-interest
trust, to which a charity becomes a beneficiary, but the donor also
maintains a partial interest thereto. The philanthropy practice in theUnited States confirms this utility of trust form, if not all of them arepurely charitable, as vehicle for private pursuit to public interests.
Second, from the legal policy perspective, such flexibility of trust
form should be evaluated by balancing the benefits and detriments that― 182 ―

such flexibility might bring about. Trust form’s flexible arrangement
leaves a certain level of “control” to the hand of donor; it ameliorates
donor’s cost-benefit calculation, possibly encourages the donor to give
more. Yet donor’s private control, let alone the most egregious case ofprivate interest inurement, might come with social costs of “charitablyinefficient” consumption of the devoted property.
Thirdly, the appreciation of charitable trusts as vehicle for private
benefactors to put their property in “the flow” toward the public
interest goals with certain level of flexible arrangement shall lead us
to revisit our way to consider “tax preference” to charitable trusts.
Traditionally the issue is discussed solely in terms of the balance
between “the generosity of tax preference” and “the public worthinessof a given organization/activity”: that is, “if you want more generous
tax preference, you must be more publicly disciplined and worthy.”
There is nothing wrong with this line of argument, but one shouldalways keep in mind the question of where to draw the baselineof tax treatment. Even if a given “charitable” cause endorsed by acertain benefactor is found inadequate to tax preference, it should
not necessarily mean that the tax should “punish” such a “charitable”
initiative either. The key is tax neutrality to the private person’s freedisposition of her property, provided that it is neither socially harmfulnor against the law. This insight encourages us to design the new tax
regime for charitable trusts (including ones that have pursued but
failed to obtain certification), the system to provide well-articulated tax
treatment based on the character of each trust arrangement. “One-sizefits all” approach is not suitable to the legislative reform that will makethe most of the potential of charitable trust form.

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