Why are legacies so important to Charities?
A gift under your Will to a charity is often called a “charitable legacy”.
Legacy income is one of the largest sources of voluntary income to the charity sector in the UK. Without the funds that come through legacies and lifetime gifts, many charities would simply not be able to operate at their current level. For example, in 2017/18, 29% of the income received by Cancer Research UK was via Will legacies.
Practically speaking leaving a gift in your Will allows you to benefit charities without limiting your standard of living during your lifetime. It can be a way of saving thank you, acknowledging the charity’s hard work and supporting them to continue to deliver those services in the future.
How can I leave a gift to charity in my Will?
If you know which charity you want to benefit, you can include a clause in your Will setting out exactly how you want them to benefit. You will need to know the name of your chosen charity and the registered address.
A charitable gift in your Will could take several forms. It might be:
A cash lump sum, e.g. £5,000;
A specified item, e.g. your house or a valuable painting; or
A share, or all of, your residuary estate. Your residuary estate is what is left after the payment of other gifts, debts and administration expenses and tax.
You can even specify how you want the charity to use the gift; although, it is always best to discuss any conditions you want to impose with the charity first. If the charity were to view the conditions as too onerous or incompatible with their charitable objectives, they may reject the gift entirely.
If, on the other hand, you are undecided about which charities you want to benefit, you can set the amount to be gifted and leave it to your executors to decide which charities are most in need at the date of your death.
How does a gift to charity affect the amount of inheritance tax my estate will pay?
Gifts left in your Will to UK Charities are free from inheritance tax. This means they are taken off the value of your estate before tax is calculated.
In addition to the value of the gift being tax free, charitable gifts can also reduce the amount of inheritance tax that the rest of your estate will pay. If you give at least 10% of your taxable estate to charity, the inheritance tax rate that applies to the rest your estate is reduced from 40% to 36%. If you have a taxable estate, with proper planning and advice, a gift to charity could actually increase the amount your family receive.
Do I need to make a new Will?
If you have already made a Will, but now wish to include a charity, you have several options.
The first option is to prepare a new Will incorporating the charitable gift. This is normally the best way to proceed if you wish to gift a share in your residuary estate to charity. The new Will replaces your old Will.
The second option is to update your existing Will using a Codicil. Your original Will stays in force subject to the amendments made in the subsequent Codicil. A Codicil is to be used for simple amendments, for example including a specified cash gift of £5,000 or changing the amount to be gifted to the charity. It is not advisable to have more than one or two Codicils.
Can I change my mind and benefit a different charity?
Including a charity in your Will does not constitute a binding obligation to benefit them. So long as you have mental capacity, you are free to change your Will at any time.
Similarly, you do not have to tell the charity that you are leaving them a gift. The contents of your Will can remain confidential until your death.
If you would like to be kept up to date with legal news and receive helpful insights about Wills and more, follow us on social media.