Many of us would love to be able to give more to charity, if we felt we could afford it. But being cautious animals we generally confine our giving to collecting tins and modest monthly payments to our favourite charities.
Why not consider making a more substantial gift to charity, in your Will? This is your chance to make a real difference to a cause you care about.
There are many ways in which you can give to charity, in your Will:
- A gift of a fixed amount of money
- A gift of particular assets (eg a painting, item of jewellery, shares or a house)
- An index-linked gift of money
- A percentage share of your estate
- For larger amounts you could set up a new charitable trust in your Will
If you are concerned that making a charitable gift will leave your spouse or partner short of money, the gift can be expressed to take effect only if you have survived your spouse/partner.
As well as the personal satisfaction to be gained by leaving money to a deserving cause, a charitable gift made on death can also have significant inheritance tax (IHT) benefits.
- Gifts to qualifying charities (in broad terms those registered in the EU) are exempt from IHT
- If you give at least 10% of your net taxable estate to charity, the rest of your estate may qualify for a reduced rate of IHT (36% as opposed to 40%)
If you are drafting your own Will, many UK charities give suggested wording for legacies on their websites. This wording is suitable if you are leaving a simple cash legacy to your chosen charity, for its general purposes.
However, you should seek legal advice in the following circumstances (particularly if IHT exemption or reduced rate is an important factor):
- If there is any doubt that the recipient of the gift would qualify for charity exemption (eg where a private or family charity is involved)
- You wish to ensure that your charitable gift will always meet the 10% test, despite changes to your assets over time (this can be achieved by a specific form of wording, but it is complex)
- You wish your executors to decide which charity or charities to benefit
- You wish to set up a new charitable trust, in your Will
What if a loved one has died and you want to make a charitable gift in their memory, from money or other assets you have inherited?
- Any gift you make will be exempt from IHT, from your own point of view
- If the gift is made by ‘deed of variation’ within 2 years of the death, it is treated for IHT purposes as having been made by the deceased. If IHT was paid on the estate, a refund of tax will be due (based on the size of the charitable gift) and if the gift satisfies the 10% test, a further tax refund may be claimed on the basis that the remainder of the estate qualifies for the reduced tax rate of 36%
- If you decide to donate the deceased’s household and personal goods to a charity shop, IHT exemption can be claimed without the need for a formal deed of variation
For more information on this matter or any other private client matter, please contact: firstname.lastname@example.org or call 01483 302000