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Giving to charities in your will
When giving to charities in your will, there are three things that are useful to know. Rosalyn Workman, solicitor in our Private Client team, explains the practicalities behind these points.
1. The big advantage of leaving a gift to charities in your Will (apart from the obvious feel good factor) is that it is exempt from Inheritance Tax. A lot of clients prefer their hard-earned assets to go to a worthy cause, rather than HMRC, and who could blame them.
The charity exemption tends to be quite common knowledge, but there is another advantage to giving to charity in your Will that is less so and that is, it can reduce the percentage of Inheritance Tax levied against your whole estate. If you leave 10% of your net estate (your estate after other exemptions have been deducted) then the Inheritance Tax payable is reduced from 40% to 36%. This is something to bear in mind when you are considering how much to give to charity.
2. If you are thinking about leaving something to a charity, you may wish to think about what would happen if that charity does not exist at the date of your death. If your Will has been prepared by a solicitor, it is likely that they have incorporated the STEP standard provisions into your Will. One of the provisions is that if the charity no longer exists, your Executors should make the gift to a similar charity.
However, if you have prepared the Will yourself and it does not contain such a provision, then it is worth including a clause that allows your Executors to choose an alternative charity. This is especially important if you are leaving the whole of your residuary estate to one charity in your Will. Without this clause your estate may become intestate, which means that your estate will pass to parties you had not envisaged or did not want it to pass to.
3. It is important to think about the type of gift you are making to the charities. If you leave them a specific sum of money, bear in mind that if your estate is worth a lot less than you envisaged at the time of your death, perhaps because of care fees, then any specific sums left in your Will will be paid first and then what is left is paid to whoever you have left the residue of your estate to.
If it is important that the persons you leave your residuary estate to receive more than the charities, then you may wish to make the charities beneficiaries of your residuary estate also. This way your estate is distributed between your residuary beneficiaries according to the shares stated in your Will. For example, you may wish to leave 75% to your family members and 25% to charities. However, you should bear in mind the shares may increase or decrease depending on the size of your estate at the date of your death and therefore you could put a cap on the amount passing to charities.
If you would like to discuss your Will and charitable giving in more detail, please contact Rosalyn Workman.