There are a number of matters you should bear in mind if you are considering leaving a legacy to charity. Anyone can leave money to a charity in their will and some charities make it easier for people to leave a legacy to their charity as part of their fundraising activities.
There are four main types of gift commonly left to a charity in a will:
- Pecuniary Gift – this is a sum of money left to a charity in a will
- Residuary Gift – this is a gift of the remainder of an estate after all other beneficiaries have been provided for
- Specific Request – this is a gift of a named item – for example, a painting
- Contingent benefit – this is a gift that is dependent on other factors, such as the donor outliving all other beneficiaries
Out of these methods the easiest for all concerned might be the very first one. Certainly we would recommend this if possible. If you leave the residue of your estate to a charity issues can arise that cause delay, cost and upset. This comes about because the Charity will be under a duty to maximise the amount that it receives and could, as a consequence, mean additional valuations of items to ensure the price on offer (although acceptable to all other beneficiaries) is correct. This issue is overcome if the Charity is to receive a fixed sum.
Legacies to charities are exempt from inheritance tax, so it may help reduce the amount of tax payable if the estate is over the exempt threshold. Put another way, if you want to benefit a charity then the amount the charity receives is the full amount of the legacy and that sum is ignored when calculating how much duty has to be paid on your estate. A reduced rate of inheritance tax of 36 per cent for estates leaving 10 per cent or more to charity.
To the voluntary sector as a whole, the annual income created by legacies forms 15% of all voluntary income received by British charities. As it is not obvious how a donation can affect the final value of your estate there is this calculator to help.
Something to bear in mind is that if you do want to make a significant donation to a charity in your will, the charity might be happy to cover the cost of drawing the will. If you like we can contact the charity on your behalf to see if this is a possibility.