Writing a will is an important aspect of estate planning. When considering how you would like your estate to be distributed upon your death, you might consider leaving a share of your estate or a legacy to a charity or charities.
While many people give to charities during lifetime, did you know that you can also benefit charities on your death? Coined 'willanthropy' by Remember a Charity (an organisation raising awareness and providing advice and resources surrounding charity legacies) the term is defined as the act of giving to charity in your will.
Why include a legacy to a charity in my will?
Perhaps you have a connection to a certain charity or charities and wish for them to benefit from your estate as a means of giving back or saying 'thank you'? Maybe you have supported a charity during your life and would like this support to continue after your death?
Charities rely on the generosity of gifts and donations - even a small bequest can make a big difference. A recent report showed that £1 in every £5 donated to Scotland's charities is given through gifts in wills.
How might a legacy to a charity change my inheritance tax position?
If your estate exceeds a certain value, it may be liable to pay inheritance tax ('IHT') on your death. IHT is charged at a standard rate of 40% on the net value of your estate (that is, the value of your estate after any legacies, debts and expenses are paid and the deduction of any IHT reliefs).
The good news is any part of your estate left to charity in your will is completely exempt from inheritance tax. What is more, if you leave 10% or more of your estate to charity, the rate of IHT on the remaining value of your estate (if payable) will be reduced to 36% instead of 40%.
What are the practical points to consider?
Firstly, you should choose which charity or charities you would like to benefit from your estate. You can give to as many charities as you wish.
It is important to be specific when naming your chosen charity in your will. It is also good practice to include the registered charity number. This will allow for the charity to be easily identified. You may also wish to consider whether it is the national charity that you wish to benefit or the local centre or branch for the charity.
Next, you should decide what you would like the charity to receive. You might have a specific sum of money in mind which would be achieved by including a legacy in your will. Leaving a legacy in your will would allow the full sum to be paid to your chosen charity on your death.
If you would like the gift to remain flexible so that changes in the value of your estate and inflation can be taken into account, you could leave a percentage of your estate to the charity or charities.
You can also make a bequest of a specific item to charity. This could be a tangible item such as jewellery, paintings or antiques. You can even leave the proceeds of an investment account or shareholding to charities. It is important to include a sufficient description of any specific items that you wish to leave to charity in your will so that your executors can identify and distribute them in accordance with your wishes.
What if my chosen charity has changed its name or is no longer in existence when I die?
Wording can be included in your will to ensure that your executors have specific powers in this situation. You can provide for your executors to have the power to make over the legacy to another charity with similar purposes where your chosen charity has either changed its name or no longer exists at the time of your death.
I already have a will. Can I still provide for a charity?
Of course – you have two options. You may choose to update your existing will using a codicil to add a charity legacy. Alternatively, you might choose to prepare a new will incorporating the gift to charity which will replace your existing will.
The best option for you shall depend on how many changes you wish to make and how straightforward (or complex) these changes are.
If you would like more information on how you can become a willanthropist, please get in touch with the personal law team at Brodies today.
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