5 useful things you might not know about gifting to charities in your Will
Many people will consider making a gift to a charities in their Will with the thought that a worthy cause will be able to benefit after they have gone. However, there can be other benefits to gifting to charity too. We look at five things you should consider when gifting to charity in a Will, that you might not already know.
1. If you leave 10% or more of your estate to charity in your Will you could be entitled to a reduced rate of Inheritance Tax (IHT) –
This provision can be beneficial for anyone who is looking at reducing their IHT liability on their death and gifting to a charity at the same time. If you intend to make a gift to charity in your will which equates to 10% of your overall estate value, you should be able to benefit from a reduced rate of IHT of 36% rather than the standard rate of 40%. Depending on the size of your estate this could represent a significant saving on IHT, which could benefit all the beneficiaries in your estate.
2. Gifts to registered charities can be made free of Inheritance Tax
Charities registered in the UK are exempt beneficiaries when it comes to IHT so any gift to them will pass free of IHT.
3. You can ask your executors to make a choice about which charities to benefit on your death
If you know you would like to benefit a charity or charities but are not entirely sure at the moment which one(s) to choose, or if you are concerned that certain charities may no longer be around when you die. You can add a clause into your Will to make a gift to charities with the direction that your executors should choose exactly which charities should benefit when they administer your estate. You can always leave a memorandum of wishes with some guidance for your executors to let them know that you would like to benefit a charity supporting animal rescue or cancer support, for example, to help them with their decision.
4. You can add charities as potential beneficiaries in a discretionary trust
There can be a number of reasons why it could be a good idea to set up a discretionary trust in your Will and any professional Will Writer can to discuss this with you if it becomes apparent that you could benefit from putting a trust in your Will. A discretionary trust will need to list out a number of beneficiaries that could potentially benefit from the trust assets. Commonly these beneficiaries will include a surviving spouse, children, grandchildren and other loved ones but you can also add charities to the list of potential beneficiaries. This will give your trustees (the people who will manage the trust assets) the power to gift to charities as well as your other beneficiaries at their discretion.
5. Legacies will always be paid from your estate first
If you leave a specific sum of money to a beneficiary in your Will, for example, a gift of £1,000 to a particular charity, this sum of money will always be paid out before the residue of your estate is distributed to your named beneficiaries (the residue of your estate is the amount which is left over once all your debts have been paid and any legacy payments have been made). What is often not considered is what will happen if someone’s estate reduces during their lifetime (for example, as a result of care costs) and there is not enough available to pay all the legacies in their Will. In this case the legacies will have to reduce proportionally, and the residual beneficiaries may end up with nothing at all. For this reason, it is often worth considering leaving a proportion of the residue to named beneficiaries, including charities, rather than providing fixed sums of money.