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HCR Law Events

29 March 2022

Charitable gifts in wills: your questions answered

Q. What can I leave to charity in my will?

A. You can gift:
• Money
• Assets
• Property
• Part, or all, of your residuary estate – what’s left after the payment of specific gifts, debts, funeral expenses and inheritance tax (IHT).

Q. How do I leave a gift to charity in my will?

A. If you are sure of the charities you wish to benefit, you can name them in your will.
If you do not know what charities you want to benefit yet, but still want to write a will, that is not a problem. You can draft a will to include a general charitable trust. This gives you the flexibility to decide on the charities later (and to be able to change those charities) whilst guaranteeing that a charitable gift will be made.

Q. Are there any tax benefits from leaving a legacy to a charity in my will

A. All charitable gifts in a will are exempt from IHT which is currently payable at a rate of 40%. Another benefit is that if you leave 10% or more of your net estate to charity in your will, the rest of your estate is taxed at a lower rate of 36%.

This means that charitable giving can be very tax efficient, as well as a fantastic way to help organisations close to your heart. However, reaching the 10% threshold and ensuring that the reduced tax rate applies to the whole estate is not as easy as it first appears. The different assets in an estate need to be considered and additional steps may be required.

Q. I’m a beneficiary under a will, should I give some of the money to charity?

A. Quite possibly. You could inherit more by giving a part of it to charity. This is because an additional donation to charity may allow the executors of an estate to benefit from the reduced rate of IHT.
Please note that this can only be achieved if the will is varied by a Deed of Variation within two years of the date of death. This is a document allowing beneficiaries to make changes to their entitlement from a will after a person has died.

Q. How can I make sure the charity uses my gift towards a specific purpose?

A. Charities generally prefer to receive gifts for their general charitable purposes. This ensures that a charity will be able to use your gift.
If you want complete certainty that your gift will be used for the purpose you want, there is an option to create a restricted fund. A restricted fund is a special kind of trust in which the donation must be set aside by the charity to fund a defined purpose of your choosing.

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About the Author
Laura Banks, Partner

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