Are you considering leaving money to charity in your Will? Wills and Probate specialist, Jenny Greenland, explains what to do and issues you should be aware of.
Our team are available on 01225 755656, or by email. Alternatively, you can complete the Contact Form at the foot of this page.
Many of us intend to leave money to one or more charities when we die. You can only guarantee this will happen by leaving a legacy in your Will.
Your legacy can be a fixed amount of money or a percentage of your residuary estate. Your residuary estate is the amount left after any specific gifts in your Will have been paid from the ‘baseline amount’. The baseline amount is the value of assets in your sole name (as opposed to joint assets or assets held in trust) less IHT exemptions, debts, and funeral expenses. However, you should be aware that splitting your residuary estate between charities and individuals may mean they receive unequal shares, as the gift to charity will be tax-free.
It’s also possible to make a charitable gift inflation-proof by including a clause index-linking the gift.
Also, gifts to charity do not have to be monetary gifts. Some people leave property or chattels such as art or antiques. For example, one of our clients recently left a family heirloom to a relative for life, after which it will pass to our client’s chosen charity. This is known as a reversionary gift.
Which charities can I support in my will?
You can support any charity you choose. Most charitable legacies are left to registered charities. However, an organisation does not necessarily have to be registered as a charity for you to benefit from the tax advantages of charitable giving (for which, see below). As long as the definition of a charity – as set out in Section 1 of the Charities Act 2011 – is satisfied, the tax rules apply. However, if the organisation is not a registered charity, you should first take advice.
How to support a charity in your Will?
When we take instructions from you on writing your Will, let us know to which charity or charities you wish to leave money. Remember, there are a lot of charities, and it’s not unusual to find some with similar names. Also, charities do occasionally change their name. To ensure your gift finds its way to your chosen charity, we will always include the charity’s registration number in your Will.
Although rare, somebody – most likely a family member – may feel that you have made insufficient provision for them in your Will and seek to bring a claim against your estate under the Inheritance Act. To reduce the possibility of a family rift or even expensive litigation, consider carefully whether a charitable gift is likely to cause friction, particularly if the size of the gift represents a significant proportion of your estate.
If you would like the charity to use the funds for a particular purpose, you can say so in your Will. But always check first with the charity that this is feasible, otherwise your wishes can be ignored.
Are donations to charity in a Will tax free?
Regardless of the amount, a gift in your Will to a qualifying charity will be exempt from IHT.
However, if the gift satisfies certain conditions, it can also reduce the IHT rate of your estate from 40% to 36%. We will discuss this with you as part of your IHT planning. In short, however, the 36% rate applies where you leave at least 10% of the ‘baseline amount’ of your estate to charity.