It is becoming increasingly common for people to leave money to charity in their Will. In fact, according to the European Fundraising Association, legacies left in Wills are the largest single source of voluntary income for UK charities, raising almost £3.9 billion for good causes annually. In Scotland, legacy income increased by £10 million in only three years, reaching £130 million in the year 2020 – 2021.
The Benefits of Charitable Giving
It is not only beneficial for a charity if you choose to leave money to them in your Will, but it can also have significant benefits for Inheritance Tax purposes.
Any money which you gift during your lifetime or leave in your Will to a qualifying charity is exempt from Inheritance Tax. This means that if you make a gift to a qualifying charity during your lifetime, the value of the gift is immediately discounted from the value of your estate, and you do not need to wait seven years for the gift to become “exempt”, as you would if you were gifting to an individual or non-charitable body.
Furthermore, if you chose to leave more than 10% of the net value of your estate to a qualifying charity (or charities) then the rate of Inheritance Tax which is charged on the non-exempt proportion of your estate is reduced from 40% to 36%. This can result in a significant tax saving.
Options Available for Giving
There is more than one way in which you can chose to benefit charities in your Will. You could leave a legacy of a specific sum of money or a particular asset (for example a house or a collection of jewellery), or you could leave a percentage of your entire estate to charity (for example 10%, 20% or even 100%).
If you wish to make considerable charitable donations during your lifetime, you might wish to consider the possibility of establishing your own charitable Trust. If you chose to do so you could then leave a legacy to your own Trust in your Will, so that the trust could carry on administering funds for the benefit of your chosen causes following your death.
Qualifying Charities
There is no restriction on the number or types of charities you can choose to benefit, the only restriction is the requirement to be an approved charity which is eligible for UK tax relief listed on the database of charities maintained by HM Revenue & Customs. Generally speaking, any charity registered in the UK, an EU member State or certain other specified territories will be eligible.
You should always check the charitable status of an organisation before including them in your Will, and most charitable organisations which qualify will appear on the Charity Register for England and Wales, or with the Office of the Scottish Charity Regulator (OSCR) in Scotland. Links to both of these websites can be found at the end of this article.
How Thorntons Can Help
The best option for you will depend on your circumstances and how the assets of your estate are comprised. You might wish to prioritise family and friends in your Will but have a particular charity that is special to you, or you might have many charities that you would like to benefit.
If you are considering including a charitable legacy in your Will one of Private Client team would be happy to meet with you to discuss how best to structure your Will to achieve your wishes. You can contact our Private Client department on 03330 430150.
