You don’t have to be a philanthropist to leave money to charity in your Will. Every charitable donation counts, no matter how small. Most UK charities promote gifting through Wills. This year sees International Day of Charity take place on 5 September 2022, which presents an ideal opportunity to consider including a charitable donation in your Will.
International Day of Charity on 5 September 2022
The United Nations General Assembly has chosen 5 September 2022 as International Day of Charity. This is in recognition of the role of charity in alleviating human suffering and humanitarian crises throughout the world. This date was chosen to commemorate the anniversary of the death of Mother Teresa and is partly in recognition of her lifetime of dedication to charitable causes.
The benefits: of leaving gifts to charity in your Will
A key benefit of leaving gifts to charity in your Will is that you are supporting charities and charitable causes that you believe in. This helps them to further their aims and provides an invaluable source of funding. Without donations from individuals, charities would find it exceedingly difficult to continue to operate.
Donations to charity in your Will are exempt from any charge to Inheritance Tax. This has two benefits
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- it means that the charity will receive the full amount of the donation without any tax deduction, and;
- it means that the bequest will not impact your available IHT threshold of £325,000 (the “nil rate band”, being the amount of your estate that will be taxed at 0% under current rules).
In addition, when you donate 10% or more of your taxable estate (that is, after deduction of all reliefs and exemptions, including the IHT threshold and spousal exemption but ignoring charity relief) to charity in your Will, the IHT rate your estate pays is reduced from 40% to 36%. With careful planning, this can lead to a significant tax saving in large estates.
How to leave a gift to charity in your Will
You can create a legacy in your Will leaving all or part of your estate to charity. You have three options when you draw up your Will. These are:
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- A Pecuniary Legacy: where you specify an amount of money or a percentage of your estate you wish to leave to a specific charity;
- A Specific Legacy: where you leave a specific item; for example, shares in a company or a property from which the charity would benefit, to a charity;
- A Residual Legacy: where you leave the residue of your estate to a charity.
You can also spread these legacies amongst multiple charities. It is important to ensure that you correctly identify each charity and make provision for what should happen if your nominated charity no longer exists or has merged with another charity.
Lifetime donations to charity
You may also wish to consider making lifetime donations to charity. Lifetime gifts to charity are exempt from any charge to tax and can benefit both the charity and provide some helpful tax planning options for the donor. There are some highly advantageous tax reliefs available to individual taxpayers in the form of Gift Aid and Share Aid.
Specialist Wills Solicitors, Edinburgh
Adam Swayne is a Senior Solicitor within our Asset Protection Group and specialises in Wills and estate planning. If you would like to discuss any of the issues covered in this article, or if you require assistance with any other matter, please complete our contact form or call us on 0131 225 1200.
Murray Beith Murray was established in 1849 as advisors for generations of clients, committed to our values of integrity, expertise and trust. This aim and these values continue to this day, as does our commitment to be here when you need us.