Do you want to leave something in your Will to Charity?
Posted on 23 March 2018 by Catherine Murton
Many of us support charities, be it with regular donations, volunteering or taking part in fundraisers from raft races to shaving of heads. Everyone at Pardoes always seem particularly keen to support cake sales and coffee mornings! All charities rely heavily on public support to be able to carry out their invaluable work. There are thousands of charities from tiny local ones set up for a specific one-off purpose to the huge international charities operating in every country on the planet.
Remembering a charity in your will can be a way of giving a much larger sum of money than perhaps you could afford in your lifetime. The Government is also keen to support registered charities by offering tax incentives on charitable donations. If your estate is large enough that Inheritance Tax will be payable, any sums given to charity will not be taken into account in calculating your Inheritance Tax liability. Furthermore, if you give 10% or more of your net estate to charity the part of your estate that is taxable will only be taxed at 36% instead of 40%.
The bottom line is that charitable donations mean that lots of good work can be carried out and it is all very tax efficient! You may be sensing a ‘but’? As a private client solicitor I draw up hundreds of wills with legacies for charities or naming charities as the primary beneficiaries. In fact, it has always been something that I have been very glad to assist with. There are a few pitfalls though where the will has been badly drafted and these can cause lots of problems for family members, the person administering the estate and the charities themselves.
The first decision to be made is whether the charity is to receive a legacy or a percentage of the overall estate. A legacy is a fixed amount and it is paid before the remainder of the estate is distributed. This means that if a large legacy is included and the assets decrease after the will is made the legacy to the charity could be more than the residuary estate passing to family members. Over time the value of legacies also diminish so it is important to keep your will under review, otherwise the charity may not benefit to the level that you intended.
If you choose to give a charity a percentage of your estate the problems associated with legacies are solved. However, if the charity is to share your estate with your relatives consider whether your family may wish to retain some assets, such as your house. If so, the charity would need to agree to this. The charities are obliged to ensure that they receive the full amount possible from the legacy and they may not automatically accept probate value as the transfer value, particularly in a rising market. They would need to receive funds from other assets to fully compensate for anything retained by your family.
A properly drawn will should allow the treasurer or any other proper officer of the charity to give receipt for the gift and it should allow that if the charity has changed its name or been replaced by a charity doing exactly the same work that the gift is still valid.
Charities rely heavily on the funds received from people after their death and it allows them to carry out essential and wonderful work. If you are considering giving something to your favourite charity then please pop in to one of our legal clinics, give me a call on 01935 382689 or email me at firstname.lastname@example.org to discuss the most appropriate way forward.