No-one lives forever – but you can make sure your final good deeds will outlive you. If there are charitable causes you like to support, making your will is the very best time to leave a contribution that won’t be forgotten. Many charities depend heavily on legacies – here’s why you should consider offering yours.
Writing your will is one of those times when you think about what’s most important. The first decisions are often easy ones – what to leave your surviving family, whether you want to leave anything to friends, and who might have care of your children should you die prematurely. However, many people decide they want to go further than that, and leave charitable gifts as well. It’s common for people to select charities that have helped them personally (such as medical or elderly care charities), but whatever the reason, a legacy can help not just the charity in question but your other beneficiaries as well.
The taxman’s loss is the charity’s gain
Bear in mind that a certain amount of money may be lost to your estate anyway, through inheritance tax (IHT). If you’d rather it was you (as opposed to the Chancellor) who decides what happens to your money, then a charitable gift can be the ideal solution at little (or even zero) net cost to your beneficiaries. The money you donate to charity in your will is deducted from the value of your estate before IHT is calculated, thus reducing the amount your beneficiaries will have to pay.
Also, if you donate more than 10 per cent of your total estate to charity, then the rest of your taxable estate will be taxed at a reduced rate of 36 per cent (as opposed to 40 per cent). Furthermore, if the donation brings the total value of your estate below the IHT threshold of £325,000 then no tax will need to be paid.
But few people (we hope) leave legacies to charity just to annoy the taxman (though some do it to annoy their families). If you’d like to leave a posthumous gift but aren’t sure how to go about it, bear in mind that there are several different options open to you.
Ways to leave a legacy
At the point when you make your will, there will probably be many uncertainties. You don’t know how long you will live, how many beneficiaries will definitely survive you, or exactly what the value of your estate will be. This can make it tricky to decide what gifts to leave to charity. Options include:
- A cash gift
You could leave a fixed sum of money. However this is probably not the best choice, as this sum will be unchangeable but your estate may grow or shrink in years to come.
- Particular items
You might have antiques, property, land or other valuables that you wish to leave to charity.
- A gift in trust
You can leave a gift that a charity can use over a period of time, for it then to pass on to other recipients later. Conversely, you could do it the other way round, so that the charity receives it after another beneficiary has had use of it. This could well apply to a gift of property, such as a Scout hut for instance.
- A conditional gift
You could specify that certain conditions must be met for the charity to receive your gift – for instance, if your other beneficiaries die before you do, you can specify that the charity will inherit instead.
- A share of your estate
This is the simplest and often the most effective way to leave a gift. You can specify a percentage (bearing in mind that magic 10 per cent) or you can make a ‘residuary gift’, whereby everything not specifically left to your other beneficiaries will go to the charity.
Remember, you can talk all you like about wanting to leave a gift to a cancer charity or to an animal shelter or wherever – but if you don’t specify it in a legally binding will, it won’t happen. You might ask your children to make the donation on your behalf, but by then your whole estate will have been taxed at the normal rate, so your children will be losing out needlessly and giving away money that should have been theirs.
A financial adviser can help you sort out your estate (that’s everything you own) to make it easier to decide how to distribute it and what gifts you might like to make to charity. Then a solicitor can help you draw up a legally binding will that covers all eventualities and expresses your wishes clearly.