UK: To Gift Or Not To Gift? Leaving Charitable Gifts In Your Will

The Census 2021 results confirm that the population in England & Wales is at a record high for the over-65s, with over half a million in the 90-plus range for the first time ever.  Sky News' analysis of the census data has found that in most regions, this has been a creeping trend over the past 40 years. And so with great age, comes great responsibility, and additional considerations with regards to adult social care and estate planning.

Interestingly, there has been an upward trend in charitable gifts over the previous decade, according to Smee & Ford's annual Legacy Trends Report. At Gorvins, we have also seen an increasing number of people bequeathing gifts to charities in their wills, and this can be for a variety of reasons ranging from the death of a spouse, to gifts to charities which have contributed towards the health of a family member, to charitable gifts for inheritance tax advantages.

In this blog, we will consider why you might want to leave a gift to charity in your will (whatever your age), what advantages this may have for your taxable estate and what happens if your chosen charity no longer exists at the time of your death.

Why leave a gift to charity?

Typically, we all want to leave our estates to the next generation so that we can ensure that they are well provided for. However, with an ever-ageing population, we are seeing increasing numbers of people in their 70's, 80's and 90's whose families themselves have aged or may be in their later stages of life. Such families are therefore likely to be prosperous in their own right, without the need for substantial inheritances from parents, which could in turn create inheritance tax problems for the next generation. It follows that elderly people are increasingly choosing to include charitable gifts within their wills if they believe that their families will already be adequately provided for.

Conversely, with a population which continues to age, it follows that there are increasing numbers of people who may live to outgrow their family or friends. You may be wondering who to leave your estate to, if you find yourself in this situation. Leaving a gift to your favourite charity ensures that your estate is passed to a cause that you support and would want to see benefit, rather than having your estate fall to long-lost relatives or potentially the crown under the Intestacy Rules. The intestacy rules dictate that your estate is to be distributed amongst your surviving relatives, in a prescribed order. This can lead to unforeseen and sometimes undesirable consequences and could also be costly for your estate in trying to trace such relatives, so it is always better for you to retain control of who your estate should pass to by including instructions for this in your will.

When making a will that leaves everything to your children and grandchildren, you can include a ‘last case resort' scenario. This directs what would happen to your estate in the event that all of your named beneficiaries pre-decease you. Whilst unlikely, unfortunately sometimes these events do happen. You might want to consider adding a charity in this scenario, and this will prevent your will from failing and your estate from falling into the intestacy rules.

The inheritance Tax Advantage

Legacies left to a charity in your will attracts 100% relief for inheritance tax. If you have a taxable estate and you choose to leave your estate to be divided between relatives or friends and charities then provided you leave up to 10% of your estate to charity, then the rate of inheritance tax is reduced from 40% to 36%.

What if my chosen charity changes its name and/or address?

When preparing a will, your Solicitor will check all the relevant details of your chosen charity to accurately identify them in your will.

Charities are registered with the charity commission and each charity will have a unique registered charity number. The purpose of this number is to identify a charity, even when its name and address alters over time. By including this unique number in your will, this therefore ensures that your charity can be identified through the passage of time.

What if my chosen charity no longer exists?

Most wills that are prepared by Solicitors will incorporate the STEP Standard (and sometimes Special) Provisions. These are a group of non-technical clauses to include within professional wills as standard in order to keep wills simple, straightforward, and more easily understood by all. The STEP Provisions state that if your chosen charity ceases to exist, then your trustees may proceed to pay a charity which is similar in nature and cause to your original intended charity. This therefore ensures that your wishes are adhered to as much as possible.

Lasting Power of Attorney (“LPA”)

As our population continues to age, it's important that we get our affairs in order early so that we can live out our senior years with less worry.

Over time, we may lose the capacity to deal with our own affairs and so it is important to ensure that you have a Lasting Power of Attorney in place to cover this situation. An LPA appoints someone that you trust to manage your property and finances, and your health and welfare on your behalf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.