Are you thinking about leaving money to a charity in your Will? Amy Quinn of Coodes Solicitors’ Wills, Probate and Trusts team outlines five key considerations.
Many people consider leaving some or even all of their estate to a charity in their Will. This could be because they have no obvious beneficiaries within the family, or perhaps they simply want to support a charity that is special to them. High net worth individuals might also be aware of the inheritance tax benefits of leaving a charitable legacy.
Here are some of the issues you will need to consider.
1. Making provision for your dependants
You are entitled to leave money to a charity in your Will. However, by law you must ensure you make reasonable provision for any dependants.
Legislation covered by the Inheritance (Provision for Dependants) act 1975 gives the courts powers to provide for dependants who have not been properly considered in a Will. That means that any children (including adult children), your spouse or civil partner who have not been sufficiently provided for in your Will could make a claim for part of your estate after your death.
A specialist lawyer can advise you on reasonable provision. That means that, if you want to leave some of your estate to a charity, your dependants will be properly provided for too.
2. Using a free charity Wills scheme or instructing a solicitor
Many people make use of charity Wills schemes. These involve a charity paying a firm of solicitors to write a Will for you. While the charity funds the solicitor’s fees, there is an understanding that the client may make a donation to the charity.
In some cases, the solicitor writing a charity Will may also expect to be named as the executor. This would leave your loved ones facing additional costs further down the line.
While these schemes can help to raise funds, they sometimes leave charities out of pocket. It is important to ensure you understand how the scheme works and what you need to contribute in order for the charity to benefit.
These schemes only cover very basic Wills and are not therefore suited to people with blended families or complex life situations. A basic Will is not sufficient for most people’s needs.
So, a charity Wills scheme may be a good option in some situations. However, for most people it is likely to be better to instruct a solicitor to draw up your Will and advise you on leaving a charitable legacy. This might involve leaving a charitable gift, for example 50% of your assets. Alternatively, your lawyer might advise you leave a pecuniary legacy which is a fixed sum, for example £20,000.
3. Inheritance tax considerations
It is important to get financial advice if you are considering leaving a significant sum to a charity. If you include a charitable donation in your Will, it will not count towards the total taxable value of your estate. It could also reduce the inheritance tax (IHT) applied to the rest of your assets.
For example, if you are an individual with a large estate which is inheritance taxable, you may wish to leave a charitable legacy to qualify for the reduced inheritance tax rate of 36%. If you leave at least 10% of your net estate to charity you may qualify for the reduced IHT rate of 36%. The charitable gift is exempt from IHT.
A financial advisor can go through your wishes in detail to ensure you are giving in the most beneficial way.
4. Explaining your wishes to your family
It is important that your beneficiaries know that you are including a charitable legacy in your Will. That will then give them the opportunity to ask you any questions about your wishes and for you to explain that they are also being provided for. While this may involve a difficult conversation, it could reduce the risk of your family disputing the Will after your death.
A Will should always be reviewed after any major life event. This could include getting married, divorce or separation or having children. If your previous Will included a charitable legacy, get expert legal advice on how this fits with any life changes.
5. Choosing to donate or leave a legacy
In many cases it is far better to donate to a charity rather than leaving a legacy. If you give a gift during your lifetime, and if you pay sufficient income or capital gains tax, the charity can then benefit from Gift Aid. If you want to make a significant donation, get financial advice to ensure you go about this in the most beneficial way
If you are thinking about leaving money to a charity, it is almost always best to instruct a specialist solicitor to draw up your Will. Your lawyer can then advise you on the best way to structure your Will so that the charity and your loved ones can benefit most.
For advice on any of these issues please contact Amy Quinn in the Wills, Probate and Trusts team at Coodes Solicitors, on 01326 318900 or amy.quinn @coodes.co.uk