Leaving a charitable legacy in your Will is becoming more popular, with 19% of UK charity donors choosing to leave a gift in their Will, up from 14% in 2013.
There are many reasons you might want to leave a gift to charity, the obvious one is to help a good cause, but it could also help reduce the amount of Inheritance Tax (IHT) payable on your death.
Here we take a look at 10 things you should consider when leaving gifts to charity in your Will:
1. What charities would you like to support?
Before you decide to include a gift to a charity in your Will, you need to consider which charities you would like to support. It might be a cause close to your heart or one you have been involved with during your lifetime.
2. Make sure it is a charity
You can check to see if a charity of your choice is registered with the Charity Commission to ensure it is a legitimate charity and a trustworthy setup.
You may still benefit from Inheritance Tax (IHT) advantages even if the ‘charity’ isn’t on the charity register, provided it comes under the definition of a charity in the Charities Act – this may include local sports clubs.
3. Do you have the correct charity details?
Make sure you have the charity’s correct name, registration number, and address. You can find these details on the charity register. Many charities have similar names, so to ensure your gift goes to your intended charitable beneficiary, you must make sure this is clear in your Will.
4. What do you intend to leave to charity?
This could be specific items or a cash gift as a fixed lump sum. If you opt for the former, the gift will fail if you no longer own those items when you die. Alternatively, you could leave a percentage of your estate to your chosen charity, which would ensure that the charity will receive something; of course, the amount will then depend on the value of your estate upon your death.
5. Do you wish the charitable gift to be used for a specific purpose?
If you would like the gift to be used for a specific purpose, you should include clear instructions in your Will explaining how the money will be used. Again, it may be worth discussing this with the charity beforehand to ensure your wishes are viable.
6. If the charity no longer exists upon your death, would you like to leave the gift to a similar charity?
Although this is unlikely with some of the larger, more well-known, and established charities, there is a chance that a smaller, local charity may no longer exist when you die. In this situation, you can include a provision in your Will, allowing your Executors to decide whether the charitable gift should be given to another charity with the same or a similar cause.
Ask yourself if this is something you would like to happen – are you leaving money to charity to help the specific or broader cause?
7. Inheritance tax advantages of a charitable legacy
Including charitable legacies in your Will may help reduce the Inheritance Tax payable upon your death, as charitable gifts are free of Inheritance Tax. Also, if you leave 10% or more of your estate to charity, the Inheritance Tax rate levied on your estate will be reduced from the usual 40% to 36%.
8.You don’t have to leave a lump sum
You don’t have to give a specific amount of money. Instead, you may offer part of your inheritance or certain things, such as a work of art, an antique, or a piece of jewellery. A reversionary gift might also be made, in which case the benefit first goes to a family member before being passed on to the charity number when they pass away.
9. Be mindful of changes in the value
You may give less than intended if inflation causes costs to rise and you promise a fixed sum to a charity. You may want to review your gift from time to time or make it a percentage of your estate.
10. Your gift might be the cause of a legal dispute
Your family may be fine with you giving a portion of your property or asset to charity, but some may not. For example, a beneficiary might challenge your Will under the Inheritance (Provision for Family and Dependants) Act 1975 if they feel it did not make enough financial provision for them. They may also claim that you were not in sound condition when making the document or that you were forced into doing so.
Making a charitable gift in your Will is a great way to support causes that are important to you. However, it is essential to get the legalities right to ensure that your gift goes where you intended.
Whatever your reasons for leaving money to charity, we would be happy to discuss these with you to ensure that those reasons are being met.
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© Atkins Dellow LLP 2022
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