Thinking about leaving a Charity Legacy in your Will?

Leaving a Charity legacy in your Will is not uncommon. 24% of those of us that have a Will include a Charity bequest. Charitable legacies represent a huge chunk of change for charities in the UK. Some smaller charities actually rely on these donations to keep their doors open year on year. In fact, Will donations account for one-quarter of all funds donated to Charity in the UK each year. To give that some perspective that’s around £2.24bn – yes… BILLION from just 7% of us leaving a Charity legacy. IMAGINE how much more could be raised. So, it’s unsurprising that Charities will campaign hard to get us all leaving a Charity legacy in our Wills.

So, if you’ve been thinking about leaving a Charity legacy in your Will here’s everything that you will need to know including some unexpected good news regarding Inheritance Tax (IHT).

Why leave a Charity legacy in your Will?

I know this one should be a no-brainer but I thought I’d include it anyway, because well people are funny and possibly, maybe a tiny bit vindictive. So, as far as I can tell there are three main reasons. Some more altruistic than others…

Firstly because a cause or charity is particularly close to the testator’s heart and they would like to be able to help them carry on their amazing work.

Secondly to help mitigate IHT.

And lastly to keep the money away from their family… might seem a little harsh but under the laws of intestacy an estate is split between the immediate family. By leaving everything to charity you can not only prevent members of your family from benefiting when you don’t want them to you’ll also know your money has gone to do some good. It actually happens more than you would think it does, and ioften ends with the aggrieved family members contesting the Will. However, some recent high-profile cases – Jackson Vs Ilot – which has prompted a change in the law read more about it here. Our advice is to leave a letter detailing your decision and giving the explicit reasons why.

How do I leave a charity legacy in my Will?

Like most things in life once you get down to it it’s really VERY simple. You literally just write it in when you write your Will.

To avoid any disputes you must include all the details of the charity including their registered charity number and address. If you want to leave a donation to a specific branch then it’s best to check with them first as they may not be able to accept legacies.

What can I leave?

A Charity legacy is like any other gift in your Will. So, you can leave:

  • A fixed amount of money or % of your estate– a ‘pecuniary legacy’
  • A share of what’s left once all costs and legacies have been settled – a ‘residual legacy’
  • An item/asset – a ‘specific legacy’

Reducing Inheritance Tax liabilities

Leaving a Charity Legacy is a win-win situation…. Not only do you know that your money is doing some good after your death you also get to reduce your IHT liabilities. PAY LESS TAX you say? Yep. Really.

The way it works is this. Anything that you leave to Charity is tax-free. So if your estate is hovering around the IHT threshold, by giving the difference to charity you can eliminate IHT entirely potentially save your beneficiaries thousands.

OR… if you’re feeling particularly philanthropic and leave a charity legacy in your Will that amounts to 10% of your estate you’ll enjoy a reduced IHT rate. IHT will be calculated at 36%, not the usual 40% – depending on the size of your estate that could be a small or a HEFTY saving. A savings a saving through right?

Claiming a legacy

If you’re concerned that your chosen Charity won’t receive the legacy you have left them then worry not. Charity legacies are an invaluable revenue stream. Worth an annual £2.5bn to the UK charity industry. Like ‘The Mountie’ Charities will always get their man (or their money).

In any case, your Will is a legally binding document and, like any of your other beneficiaries, they are entitled to their legacy. They may be a little more thorough and possibly a tiny bit demanding in their approach but, I don’t want to do the Third Sector a disservice. The funds are rightfully theirs, vital to the continuance of their services and they are, of course incredibly grateful.

It is the responsibility of the Executors to inform the Charity that they have been named as a beneficiary and what they have been left – its best to include a photocopy of the part of the Will that pertains to them. Depending on the type of legacy they will also ask to see further documents including:

  • A copy of the Schedule of Assets and Liabilities
  • Valuations of significant assets – such as a property,
  • Estate accounts – these are a requirement under law for any beneficiary who requests them
  • Tax deduction certificates

Click here for The Institute of Legacy Management’s guide to Executor duties when a Will contains a Charity legacy.

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