How to ensure money left in your will goes to the causes you care about

The coronavirus crisis has seen the public rally around the NHS which has benefitted from considerable fundraising efforts and donations in recent months. Research by the Charities Aid Foundation has shown that amongst those wanting to donate to charity in response to the crisis, 40% planned to donate to NHS charities and 34% to local charities.

As we consider how we can give back to those getting us through this crisis, Jan Atkinson, an estate planning solicitor at London law firm Osbornes Law explains why bequeathing money to charity in your will can actually increase what you leave behind.

“As the peak of the crisis passes, many of us are reflecting on what has happened, how it has shaped our priorities and how we can contribute to our wider community. Giving money to charity in your will is a great way to show support for those healthcare providers and local charities that have done so much throughout this crisis and to ensure they are able to continue to do so into the future, “ Jan explains.

“There are also inheritance tax advantages associated with charitable bequests, allowing you to increase the amount you are able to pass on. If you leave 10% or more of your estate to a UK registered charity, not only is the amount you give to charity free of inheritance tax, but the rate of tax on the rest of your estate is 36% instead of 40%.

“For example, if you leave an estate with liquid assets of £500,000, normally inheritance tax would be due at 40% on £175,000 of that, so your estate would have to pay £70,000 in inheritance tax. However, if you left 10% of that estate (£50,000) to charity, then the value of your chargeable assets would reduce by £50,000 and inheritance tax would be due on £125,000, but at a reduced rate of 36%. This means that your estate would only have to pay £45,000 inheritance tax.

“If you already plan to give at least 4% of your estate to charity, it’s worth considering increasing that gift to 10% so that the charity and your beneficiaries receive more.”

Jan warns it is important to let your family know of your plans in advance to avoid costly disputes arising from your will.

“When a parent unexpectedly donates a large proportion of their estate to charity without informing their family members, there is a danger they will contest the will, particularly where children were expecting a large inheritance or where estranged family members are cut out of a will in favour of a charity.

“The Inheritance Act 1975 means that if your will does not provide reasonable financial provision for any financially dependent family you may have, a family member or partner could contest a charitable gift to get the financial provision they feel they are entitled to. Fighting such actions can be hugely costly for the charity and the family.”

If you are giving to charity, it is likely you have put a lot of thought into where you would like your money to go so you will want to ensure your wishes are followed.

Jan says, “If you are giving to a large charity you may want to stipulate what your donation is to be used for.  For instance, you might want to give to Cancer Research but would like your money to be used in research relating to a particular type of cancer.  When making your will it is possible to stipulate that the bequest is contingent on the money being used for a specific purpose but it is worth checking with the charity first to make sure it will be possible to use the money in the way you wish.”

 

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Jan Atkinson Partner
Wills, Probate and Disputed Estates

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