We have all seen the adverts on the TV and on social media and in blogs, how ironic, telling us to leave a gift in our wills to a charity or to some other good cause. A lot of people reading may even be too young to be thinking about leaving wills, but it is always good to have the information at hand if you ever decide you would like to.
We should start off with a couple of facts about leaving a gift in your will, then we can talk about how whatever you choose to leave can impact lives of thousands of people.
According to Boodle Hatfield, £1.7 Billion worth of gifts are given a year to charities in people’s wills by just over 10,000 people out of the circa 600,000 who pass away each year in the UK. Gift giving makes up a huge part of a charity’s income and because of the recent shortfall in funding from events over the recent years, charities need these vital donations more than ever.
Any gift left to a charity in a will is exempt from inheritance tax and the inheritance tax rate on the remaining estate falls from 40% to 36% if at least 10% of an estate is left to a charity. This means by leaving a gift in a will, you can not only support a charity of your choice but also ensure that whoever you leave money or any of your estate to does not have to pay such an extortionate amount of inheritance tax.
It is easier than you think to leave a gift to a charity, all solicitors and charities themselves can help you with the process.
Why should I leave a gift in my will to a charity?
There are plenty of reasons to leave a gift in your will to a charity, some of them are obvious, and some of them you may not have thought about.
You are leaving a legacy for future generations. By far the most important reason is to help others who may not be as fortunate as yourselves. When you leave a gift, the charity will ensure that all of the donations you have left are used properly to help those in need. Whether this be a children’s charity, an animal charity, a homeless charity or a disability charity, your gift will ensure a charity’s good work can carry on and those that come after you have the right opportunities and access to services they need to live happy and healthy lives. You will be leaving a legacy that could help a child reach their full potential and live a life free from pain, suffering and abuse.
A simple gift can be life changing for so many people and could make the difference between someone living an unhealthy life or living a happy and healthy life.
When you leave a gift to a charity, inheritance tax is exempt on that gift and there is a reduction in the rate on your remaining estate after donating at least 10% of your estate to a charity.
How much inheritance tax will I pay?
According to Gov UK, there are very specific rules of how much you can give as gifts and how much you will be taxed in the seven years before death and after you have passed away. Any amount above the threshold of £325,000 of gifts you are leaving to family, friends or neighbours will be taxed at 40%, so if you leave a will of one million pounds, anything over the threshold will be taxed. In this case that would mean a 40% inheritance tax will be paid on £775,000 which leaves the tax bill at a staggering of £310,000!
Now that seems like a lot of money from your years of hard work to just be taken and not necessarily see the benefit of where the money is going.
Giving 10% of your estate to a charity can help you cut the inheritance tax bill from 40% to 36%. So, in this case again, if you gave 10% of a million-pound estate at £100,000 to a charity, this gift would be exempt from inheritance tax, it also means that the remaining amount above the £325,000 threshold, £575,000, would be taxed at 36%. Tax payable for this would be £207,000.
After leaving a gift to a charity the amount that you had left to give to whoever else you wanted would stand at £693,000 where are without leaving a gift to charity, the amount would be £690,000. So that is an extra £3,000 for your loved ones and a generous donation to a charity of your choice.
That was a lot of numbers crunching so let’s move on from that!
The charity once helped you or a loved one. Many of us through life find that sometimes things are not that easy and need a helping hand, maybe you are one of them. It is important to never forget those who have helped you in the past. Giving back to those who once helped you, your friends, family or other loved ones would be a fantastic gift to show your appreciation and help to continue a charity’s good work.
Whatever reason you choose to leave a gift to a charity, it will be the right one, and every charity is always extremely grateful for the support you give.
Who should I leave a gift to?
There is no right or wrong answer here. Who you leave your money to, whether it is a charity, a friend or family, it is absolutely down to you and what you want to do. You should never be forced or badgered into making a decision of where to leave your money.
If you do choose to leave something to a charity, you should look for charities that you can see are making a difference in the community, a charity that support something you are passionate about, a charity that shares your vision of a good society and a charity that has helped people or animals in real need.
A lot of people choose a charity that you have worked with before or who have helped them or their loved ones at some point, but, any charity you chose will be the right choice.
How do I leave a gift in my will to a charity?
First of all, make sure it is exactly what you want to do. It is your money and your legacy you are leaving after all.
Then you have to make sure that you are totally clued up on the Inheritance (Provision for Family and Dependant) Act 1975 and any other legal matters that should be discussed with a solicitor before choosing to donate to a charity.
Considering how complicated one of the reasons above sounded, the inheritance tax and its many guidelines and T&C’s, you’ll be happy to know that leaving a gift in your will to a charity is actually a lot simpler.
Well, when I say simple, I mean you have to ask your solicitor to help, but it is not too hard. If you talk to a solicitor and tell them specifically what you would like to leave to a charity, whether this be a gift, part of your estate, a cash donation or an item, they will be able to help you out.
Charities have dedicated pages on how to word donation requests like this in your will and some even have brochures and guidance on how to leave money or items to them.
It is always best to ensure that you have the charity’s registered charity number from the Charity Commission to make sure that there is no confusion between charities as some of the have similar names to each other.
What happens to my gift when a charity receives it?
You can choose what the charity does with your gift. When you write a will you can specify exactly what the money is spent on, whether this be a project they run, a particular cause they are donating for, for new premises or anything you can think of.
Alternatively you can leave a gift in your will and specify that the charity can use the money how they see fit within the charity.
As you can see there is a lot to think about when leaving a gift in your will to a charity, it has some great benefit for yourself, your family, the charity you are supporting and ultimately and most importantly, the next generation of people you can help live safe, comfortable and fulfilling lives.