Legacies in Wills form the foundation of some of the UK’s best known and best loved charities – indeed without them many charities would struggle to exist. Leaving a gift to charity in your Will is a good way of ensuring that causes you care about are provided for and enables you to continue to support charities that you may have supported during your lifetime.
Many clients I see want to recognise a charity which supported them or a family member during a difficult time, or which provides care to animals or overseas causes. It could be a charity which helps support the economy of the town you live in, or which supports some of the most vulnerable in your local area. Even a small gift can make a real difference to a charity and enable them to continue their work.
It is vital then, if you decide to leave a gift to charity in your Will, that this is properly expressed. The charity’s full proper name should be used along with its Charity Registration Number, and an address is also helpful. If the charity you choose to support has a number of branches or franchises, make sure you are supporting the ‘right’ one – will the funds reach your local organisation or be used nationally? It is also important to make sure that if there is a particular project you wish to support that the gift is worded correctly to make sure that even if the project has come to an end before you pass away, the charity can still receive the gift. Or not, if that it your choice!
The other aspect to be aware of is what happens if the charity itself has ended or is in the process of being wound up at the date of your death. Again, making sure the gift is worded carefully can ensure that your Executors are able to apply the gift to a charity with similar aims and objectives, rather than the gift failing all together. There is a lot to think about!
As well as the ‘feel good’ factor, there can be a financial benefit to leaving gifts to charity.
From an Inheritance Tax perspective, gifts to charity can form an important part of overall tax planning. Gifts to charity in a Will are exempt from Inheritance Tax, so if your estate will be subject to Inheritance Tax threshold, a well-placed gift to charity may ensure that less or even no tax is paid (bearing in mind of course that your estate value may fluctuate between the date you make your Will and the date of your death).
There is also a further benefit – if your estate is due to pay Inheritance Tax and you leave at least 10% of your net estate (so the value of your estate after liabilities and money owed at death) to charity in your Will, then in addition to the gift to charity being exempt from Inheritance Tax, any tax payable on the rest of the estate may well be at the reduced rate of 36% rather than the usual 40%.
The rules governing this allowance are complex and your Will needs to be drafted carefully to ensure the reduced rate will apply. But for those with substantial assets already considering a gift to charity, a properly drafted gift can provide financial benefits for the rest of the estate, as well as supporting your chosen good causes.