WillPack

Charitable Giving in Wills

Charitable Giving in Wills

Christmas is a time for giving. At this time of year spirits are high and everyone is in a giving mood, so now is a good time to consider leaving gifts to a charity or a good cause. If the spirit of Christmas alone isn’t enough to convince clients to remember a charity in their will then below are some great benefits of charitable giving.

Why Make a Gift to Charity?

Any gifts to charities are inheritance tax free if they are made to a UK based charity and the gift is both outright (without any conditions or limitations) and immediate (with no one else having an interest between the giver and the charity). Most charitable gifts, those given absolutely and without any binding conditions, will qualify.

Where a testator wishes to make gifts to charity, it is possible for their estate to obtain a reduced rate of inheritance tax. If a testator leaves 10% or more of their net estate to charity, the rate of IHT will be reduced from 40% to 36%.

The legislation regarding this is complex.  If clients are specifically intending to take advantage of this relief, a clause could be included in the will that is specifically worded so that charities inherit the exact amount of the estate necessary to receive the relief.

Options in the Will?

Apart from the obvious options of leaving specific, money or residuary gifts to charities outright, there are other options that clients could consider.

The will could be written so that a specific charitable trust is set up on the client’s death for the benefit of certain charities or charitable purposes or even just any charities or charitable purposes. This could be used to benefit charities in the long term rather than just making a one off lump sum to them on death.

Clients using this option should be aware that there would be additional costs to the estate on death in order to set up the charitable trust.

The Charitable Aid Foundation (CAF) offer their Charitable Legacy Service that may be of interest to some clients. The service is as follows.

  1. A gift will be made to CAF in the Will using specific wording.
  2. The client will identify the charities that they wish to benefit, list these in a letter of wishes and send the letter to CAF.
  3. After the client’s death, CAF will benefit the charities, taking an administration fee.

There are a number of reasons why clients may choose this service.

  1. The client can change their mind as many times as they wish. All they would need to do is amend their letter of wishes and would not need to pay for the will to be amended.
  2. The administration of the estate would be reduced as the executors would only need to correspond with one charity (CAF).
  3. CAF are a registered charity, meaning that the charitable exemption will still apply.
  4. The testator’s choices remain private.

Further information on this service can be found on the link below.

https://www.cafonline.org/my-personal-giving/long-term-giving/legacies

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