How you can make sure charity begins at home

13/08/2019

It seems that people in the UK are a charitable bunch. In fact, last year, just under £3 billion was donated to charity in wills, which is expected to rise to £3.4 billion by 2022. This figure means that 3.5 per cent of all of the money left in estates is now comprised of charitable giving

 
There is certainly no shortage of choice when it comes to picking a charity, but there are four industries that receive more than the rest. The lion’s share (38 per cent) goes to healthcare causes, with Cancer Research UK coming out on top. Following that, animal charities get the next biggest portion at 15 per cent, with disability and conservation charities each receiving eight per cent of legacies.   

Whatever the cause you support, Margaret Rowe, a Partner in our Wills, Probate and Lifetime planning team has this advice:
 
When writing a will, the main thing you need to decide is how you will divide up your property and money. The people or organisations you leave money to are called beneficiaries. Some of your assets will be easier to put a value on, such as savings accounts and valuable items. However, other things will require an educated guess or formal valuation: for example, your property, investments or business. 
 

The tax benefits of giving to charity

If you plan to leave everything to your spouse, that is tax-free, but leaving money to anyone else means your estate may be liable for inheritance tax. Often described as the ‘most hated tax’, inheritance tax is charged at 40 per cent of estates with a value of over £325,0001. However, leaving money to charity can substantially cut or remove the need for an inheritance tax bill.

1. Eliminate your inheritance tax bill
If your total estate is worth more than £325,000, you can donate enough to bring it under this amount, meaning the amount left can be split between family and friends without being subject to tax.

2. Reduce your inheritance tax bill
Giving at least 10 per cent of your estate to charity means that inheritance tax is reduced down from 40 per cent to 36 per cent, even if the value of the remaining estate remains above £325,000.
 
There are three different ways to gift your money to charity:

Pecuniary
This is the most common, and the simplest form of legacy. This is when you leave a set amount of cash to a particular beneficiary. For example, leaving £7,000 to The Donkey Sanctuary.

Specific
This is when you leave a specific item, perhaps some stocks or shares, a valuable item or a property to a beneficiary. For example, leaving a holiday cottage to Marie Curie.

Residuary
A residuary beneficiary is the person or organisation who receives the remaining balance of the estate when everything else has been paid (debts, gifts and taxes). For example, the PDSA could be a residuary beneficiary if they are left the balance of the estate after all other costs and gifts have been paid out.

The only way to make sure your chosen charity benefits is by having a will properly drafted by a solicitor to ensure your wishes are carried out.

Margaret specialises in all aspects of wills and probate work and elderly client matters, including estate planning and succession and she advises on the full range of private client matters from Court of Protection work to inheritance tax planning. Margaret is a member of the Society of Trust and Estate Practitioners (STEP) and Solicitors For the Elderly (SFE).  She can be contacted on the details below.


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