Which charity would you choose to remember?
Your university, school, or a cause close to your heart – If you were to leave a gift to charity in your Will, which charity would you choose?
As solicitors, we see a wide range of charities that benefit under people's Wills and an equally wide variety of reasons for making a charitable gift. It could be a charity that funds research into a particular illness, a charity that has supported a loved one at a difficult time, or simply a charity that supports a cause that is close to the person's heart. The list is endless. Almost without exception though, the person making the Will has a personal connection with the charity or charities that have been chosen.
In this vein, we are increasingly seeing legacies being left to charities such as schools and universities that have helped the donor get where they are in life, and where they want to give something back. Research backs up what we are seeing, with the Ross-CASE Survey of Charitable Giving to Universities having found earlier this year that British universities benefitted from over £1 billion of new donations in 2015-16. This is an increase of over 20% on the previous year's figures. But it is not only universities that can benefit from such gifts; schools with charitable status can also benefit, including the many state schools that have converted to academies. With central funding of education being increasingly squeezed, the increase in gifts from current and alumni students will no doubt be warmly welcomed.
Benefits of lifetime charitable giving
If you are a UK taxpayer and you give a gift to a charity or community amateur sports club (CASC) in your lifetime, then the gift will usually be eligible for Gift Aid. This means that the charity can claim an extra 25p for every £1 you give.
Alternatively, if your employer or pension provider runs a Payroll Giving scheme, then you can donate to your chosen charity straight from your wages or pension. This happens before tax is deducted from your income, so you benefit from tax relief on any gift you make through the scheme. The tax relief you get depends on the rate of tax you pay, but for higher rate tax payers, if you donate £1 from your gross salary, it will attract 40p tax relief, meaning that the gift itself only costs you 60p.
Leaving a gift to charity in your Will
If you leave a legacy to a charity in your Will, inheritance tax (IHT) will not be payable on that gift, and it will reduce the value of your estate on which IHT is calculated. The gift can be a cash sum, a specific item or property, or a percentage of your residuary estate. In addition, under the current rules, if you give more than 10% of your net estate to a charity then the portion of your estate that is subject to IHT will benefit from a reduced rate of 36%. When making a gift to charity in your Will, care should be taken that the charity is clearly identified and the legacy is correctly worded, and we would always recommend taking professional advice.
If you are considering updating your Will and have any queries about leaving a charitable legacy, please contact Samantha Warner or another member of the Succession and Tax team.