Marathon running, Kilimanjaro climbing and even baking cakes are a few examples of the generous ways people donate to charity. However, you don’t need to ride a rickshaw from London to Glasgow nor ramble through the UK countryside to donate money to a worthy cause. A popular way in which to benefit a charity is by naming them to receive some inheritance in your will. This is a popular option; allowing you to provide benefit to your favoured charities and organisations on your death.
There are three options available for those wishing to benefit a chosen charity or charities under their will:
One of the most popular options is to leave a pecuniary legacy. This is a gift of a fixed sum of money specified by you to go to a particular individual or organisation in your will. If considering leaving a pecuniary legacy, you should consider that your circumstances may change over time. If your estate were smaller at the date of your death because you had fewer assets at that time, would you still wish your chosen organisation to receive the same sum? A pecuniary legacy would not generally be reduced to take this fluctuation in your estate into account.
Alternatively, a specific legacy could instead be left. This is a gift of a specific item or group of items owned by you at the date of your death. It is important to consider what would happen if you did not own the item(s) that were subject of the gift at the date of your death. Likewise, you may also wish to consider the fact that the value of some assets can vary enormously over time.
Finally, you may consider making a gift from your residuary estate.
This would be a set percentage of the remainder of your estate; after the payment of any outstanding liabilities and all legacies listed in your will. Unlike a pecuniary legacy, leaving a percentage of your residuary estate would take into account fluctuations in the size of your estate prior to your death. Whilst you may find this flexibility to be preferable, you should note that how much or how little your chosen charity inherits will not be guaranteed.
In deciding how you wish to benefit a favoured charity, or indeed a family member or friend, you should consider the factors mentioned above carefully. A professional preparing your will, will guide you and advise as to potential pros and cons of each method.
Besides “the feel-good factor” and the sense of fulfilment that may be felt in benefitting a charity, there may also be potential financial benefits for your estate. Where inheritance tax is payable on an estate, and broadly speaking an individual leaves 10% or more of their estate to charity, the law currently provides for a reduction in the overall rate of inheritance tax to be paid by their estate; from 40% to 36%. My colleague, Lianne Jones, discussed this topic in further detail here.
All donations, are the lifeblood of many of the nation’s favourite charities, helping to fund cancer research, train guide dogs, restore historic buildings and so much more. By giving to your beloved charities within your will, you can not only benefit them but potentially your friends and family as well.