“Carve your name on hearts, not tombstones. A legacy is etched into the minds of others and the stories they share about you.”
― Shannon L. Alder
Three quarters of people in the UK support a charity during their lifetime. However, many people do not realise that providing for a charity in their Will is also an option for them. You can provide for family and friends and still have the opportunity of including a charity if you wish to do so.
Research commissioned by Remember A Charity, an organisation formed of more than 160 UK charities suggests that approximately 10% of individuals leave money to charity in their Wills. Total legacy gifts to charities across the UK in 2015 were estimated to be approximately £2.5 billion.
Arguably the role of a solicitor in drawing up a Will for their client is to execute the legitimate instructions of the individual, not to offer suggestions (however well intended) on how they should dispose of their estate. If this is so, where does this leave advice regarding charitable giving?
Robert Bourns, president of the Law Society, believes that "writing a Will is an important step in ensuring that the people, and causes, we have cared about will be properly looked after when we pass away. Solicitors have a vital role to play in this process, using our legal knowledge and experience to give our clients the reassurance that their wishes will be properly carried out."
According to a study by the Behavioural Insights Team and the University of Bristol, 69% of people indicated that they would be happy for their solicitor to raise the issue, while 46% thought a solicitor had ‘a duty’ to raise the option of giving to charity when discussing a Will.
There is no question that solicitors play a vital role in helping clients leave money to charity in their Wills and whilst we must not tell individuals how to distribute their assets, we can provide advice to individuals on how they can leave a legacy to a charity if they indicate a desire to do so.
If you would like to leave something in your Will to charity you can leave it in three ways:
- A fixed amount of money called a ‘pecuniary legacy’.
- A share of the remainder of your estate (once all costs and other legacies are paid out), known as ‘residuary legacy’.
- A particular item such as jewellery, furniture, a painting, etc, known as a ‘specific legacy’.
When writing the Will, it is important that the correct information is included so that the gift to the charity is clear and unambiguous. You should include:
- The name of the charity;
- The registered charity number of the charity; and
- A clause to deal with what happens if the charity has merged or ceased to exist.
You can request or express a wish in your Will that a charity use a legacy for a particular purpose. Legally, a charity is not obliged to use it in accordance with the stated wishes, but morally most charities try to comply if able to do so. Alternatively, you can expressly state in your Will that the legacy must be used for a particular purpose, for example setting up a scholarship. This type of legacy must be used for the purpose for which it has been left, but if the intended charity is unable to use the legacy for the intended purpose, it might fail and the charity might not be able to receive the legacy. Therefore, you should consider whether a binding obligatory gift is the best option.
The value of any gifts to charity in your Will does not count towards the total value of your estate for inheritance tax (IHT) purposes, due to a special 'charity exemption'. In addition, leaving money to charity can result in a reduction of IHT. Where an individual has left at least 10% of their net estate to a qualifying charity there will be a reduction in the rate of IHT from 40% to 36%. If the reduced IHT rate is motivation for you to leave some of your estate to a charity, you should seek advice since the rules on the lower tax rate are not always straightforward.
1975 Inheritance Act claims
Charitable legacies are not immune from attracting controversy. Every person has the freedom of testamentary disposition and, if they wish to leave all of their money to charity rather than to their family that is possible. However, this could leave you open to a claim under the Inheritance (Provision for Family and Dependents) Act 1975 by disinherited family members.
The number of claims against estates that have been left to charity is on the increase and people appear to be more inclined to challenge a Will where charities are involved. Cases involving charities are often reported as ‘David and Goliath’ cases, where large charities are portrayed as wasting their supporters’ money by bringing legal cases in an attempt to take what 'rightfully' belongs to an innocent and deprived family member.
To try to avoid such a claim, you should consider making ‘reasonable’ provision for potential beneficiaries. In addition, if you are considering leaving something to charity to the exclusion or detriment of other potential beneficiaries, you might consider making links with your chosen charities now. The Courts appear to have a certain degree of distaste for upholding Wills that exclude family members in favour of charities that the deceased had no links to during their lifetime.
A detailed letter of wishes to explain the absence or limitations in the provisions to beneficiaries would also prove helpful.
If you do wish to leave to a charity in your Will it is possible, but you should make sure you do it in a way that is workable, valid, and meets any legal obligations to your dependants.