Leaving money to charity

For many people, leaving money to a charity in their Will is a way of saying thank you for the help they or their loved ones have received during their lives.

Charities rely heavily on gifts they are left when people pass away. But leaving money to charity can also benefit your estate, by way of a reduction in Inheritance Tax.

Tax implications of charitable bequests

If you leave at least 10% of your net estate to charity, then in most cases there is a reduction in the amount of Inheritance Tax paid from 40% to 36% on the remainder of the estate.

In addition to this, gifts to UK/EU charities are exempt from Inheritance Tax.

How to leave money to charity in your Will

When having your Will prepared, it is important to use the correct name of the charity together with its registered charity number.

A merger clause should also be included in your Will so that the charity can still receive your gift even if it has merged with another charity and has a different name.

You can also leave your bequest in such a way that, should your chosen charity cease to exist, your gift can go instead to another charity that is carrying out similar work.

If you would like the money that you leave to be used in a specific way, you can put this request in your Will. It can either be a wish or alternatively a binding obligation. You should note that if you make it a binding obligation that the charity uses your money for a particular purpose, they may be unable to receive the gift if they are not able to put it to that use, so the gift will fail.

The type of gift you can leave to a charity

People often choose to leave a specified sum of money to charity. This is known as a pecuniary legacy and it will take priority over a gift of the residue of the estate. For example, if £10,000 is left to charity, then the residue of the estate is to be shared between family members, the £10,000 gift will be paid first.

It is also possible to leave a valuable item to a charity, although this is less common. For example, you could leave a painting or a property or some shares. This is known as a specific legacy.

Finally, you can leave a residuary legacy. This is the remainder of the estate after all debts have been paid and after all pecuniary and specific legacies have been made. You can leave the whole residue or a share of it.

When writing your Will, you should take into account that over time the residue of your estate could change substantially. For example, if you have to pay out a substantial amount in care home fees, the residue could be much less than you originally estimated. Or if you come into money, it could be much more.

It is always recommended that you review your Will from time to time, around every five years or whenever there are any major changes in your life. In addition, you may need to make changes if anyone who is named in your Will as an executor, trustee, guardian or beneficiary dies.

If you are thinking of leaving money to charity, it is important to seek professional advice to ensure you fully understand the tax implications and that your estate is structured in the most efficient way possible.

For expert advice and assistance please email us at info@anavrin.co.uk to arrange a meeting or a call-back.

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