Giving to charity16-Sep-2019
It seems that people in the UK are very charitable. In fact, last year, just under £3 billion was donated to charity in Wills, which is expected to rise to £3.4 billion by 2022. This figure means that 3.5% of all of the money left in estates is now comprised of charitable giving.
What sort of charities benefit?
There is certainly no shortage of choice when it comes to picking a charity, but there are four industries that receive more than the rest. The lion’s share (38%) goes to healthcare causes, with Cancer Research UK coming out on top. After that, animal charities get the next biggest portion with 15%, followed closely by disability charities and conservation each receiving 8% of legacies.
Writing a Will
When writing a Will, the main thing you need to decide is how you will divide up your property and money. The people or organisations you leave money to are called beneficiaries.
Some of your assets will be easier to put a value on, such as savings accounts and valuable items. However, other things will require an educated guess or formal valuation: for example, your property, investments or business.
The tax benefits of giving to charity
If you plan to leave everything to your spouse, that is tax-free, but leaving money to anyone else means your estate may be eligible for inheritance tax. Often described as the ‘most hated tax’, inheritance tax is charged at 40% on estates with a value of over any applicable inheritance tax allowances. The main inheritance tax allowance for a single person is currently £325,000. However, leaving money to charity can substantially cut or remove the need for an inheritance tax bill.
1. Eliminate your inheritance tax bill
If your total estate is worth over the applicable tax allowance, you could donate enough to charity to bring it under this amount, meaning the amount left can be split between family and friends without being subject to tax.
2. Reduce your inheritance tax bill
Giving at least 10% of your estate to charity (subject to certain adjustments) means that the inheritance tax rate is reduced down from 40% to 36%, even if the value of the remaining estate remains above the allowable amount.
Three types of legacy
There are three different ways to gift your money to charity:
This is the most common, and the simplest form of legacy. This is when you leave a set amount of cash to a particular beneficiary. For example, leaving £7,000 to The Donkey Sanctuary.
This is when you leave a specific item, perhaps some stocks or shares, a valuable item or a property to a beneficiary. For example, leaving a holiday cottage to Marie Curie.
A residuary beneficiary is the person or organisation who receives the remaining balance of the estate when everything else has been paid (debts, gifts and taxes). For example, Oxfam could be a residuary beneficiary if they are left the balance of the estate after all other costs and gifts have been paid out.
If you are concerned about charitable giving or inheritance tax, the best route is to instruct a specialist solicitor from the outset. They are trained in dealing with a range of different circumstances, ensuring that your estate will be distributed according to the terms of any will and the law.
We have one of the largest Wills, Trusts & Estates teams in Chester who are specialists in dealing with all aspects of Wills, Trusts, Tax and Estate Planning including charitable giving. For more information please contact a member of our Wills, Trusts & Estates Team on 01244 356 789 or email firstname.lastname@example.org