When you think about the future and what you'll leave behind, supporting a cause you care about through a charity gift can be a great legacy. Besides caring for your family, giving to charity can also help reduce your inheritance tax and leave more for your loved ones.
Making a charitable gift in your will isn't too complex, even if you've already made one.
Keep reading to learn about the benefits and things to consider when leaving money to charity in your will, and how to do it effectively in your estate planning.
Table of Contents
- Can you leave money to charity in your will?
- How do you leave money to charity in your will?
- Can family members dispute charity donations in my will?
- Do you pay tax on charitable donations in wills?
- How does leaving money to charity affect inheritance tax?
- How much control do you have over how money left to charity is spent?
- What are the rules about leaving money to charity in your will?
- Should I leave money to charity in my will?
- How can Lawhive help?
Can you leave money to charity in your will?
Absolutely. It's a common practice to leave money to charity in a will, and your will is your chance to specify how your money, assets, and possessions will be distributed after your death.
Many people choose to leave money to a charity that holds personal significance for them, perhaps because they've supported it during their lifetime or because they've been affected by an issue the charity addresses. There are no restrictions on which charity you can choose; it's entirely up to you.
How do you leave money to charity in your will?
If you already have a will, you can update it to include your charitable gift using a codicil, or you can create a new will altogether.
You can choose to leave a fixed amount or a percentage of your estate to charity. It's essential to use the correct charity name and registration number to make sure they receive the intended funds.
Here are some common ways of leaving a gift to charity:
Pecuniary legacy: This involves leaving a fixed sum of money to the charity.
Specific legacy: You specify an item or possession, such as artwork or furniture, to be given to the charity.
Residual legacy: You can choose to give a portion or all of your estate to charity after debts, taxes, and other expenses are settled. The charity receives what's left of your estate.
Reversionary gift: This gift initially goes to a loved one but eventually passes to the charity you've chosen when the loved one passes away.
Can family members dispute charity donations in my will?
Under the Inheritance Act (Provision for Family and Dependents) 1975, dependents can claim a fair share if your will doesn't provide for them adequately. They may contest your will to secure what they believe they're owed, including questioning charity donations.
Family members might challenge your will, alleging coercion or lack of mental capacity when you signed it. This could lead to disputes over the charity donation or even the entire will being declared invalid.
Will disputes can be complex; our specialist network of wills, trust and probate solicitors is here to help if needed.
Do you pay tax on charitable donations in wills?
Inheritance tax is usually 40% on estates worth over £325,000. However, gifts to charity are exempt from this tax.
So, any donations to charity up to £325,000 are tax-free, while anything above this threshold is taxed at 40%.
How does leaving money to charity affect inheritance tax?
If you leave 10% or more of your estate to charity, you'll qualify for a reduced tax rate. Instead of the standard 40%, your inheritance tax rate will drop to 36%.
Whether this strategy benefits you depends on the size and value of your estate. It's essential to consult with a wills, trust, and probate law expert before deciding to give to charity to reduce your inheritance tax burden.
How much control do you have over how money left to charity is spent?
You might have specific ideas about how you want your chosen charity to use the funds you've left them.
If you have particular preferences, you can express them in your will as either a wish or a binding legal obligation. However, you should do your research and be sure that your instructions align with the charity's policies and objectives.
If the charity can't fulfill your wishes, they may be unable to accept the gift and must return it to your estate. Therefore, you should be clear and considerate when specifying how you want your donation to be used.
What are the rules about leaving money to charity in your will?
Here are some key points to keep in mind:
Specify the named charity or charities you wish to leave money to, along with the fixed sum, percentage, or item from your estate.
Alternatively, you can leave the decision to the trustees of your will.
The charity must be based in the UK.
Remember to include the charity's full name and charity number in your will.
Any gift you leave is exempt from inheritance tax. Additionally, if you leave 10% or more of your estate to charity, you can reduce your inheritance tax burden from 40% to 36% in some circumstances.
Should I leave money to charity in my will?
It's a personal decision, and the choice of charity should be entirely yours. Take some time to consider which charity you'd like to benefit if you decide to make a generous gift.
If you're considering giving to charity in your will to reduce your inheritance tax burden, it's advisable to speak with a wills, trust, and probate expert. They can provide guidance on how to best organise your affairs.
How can Lawhive help?
Are you considering leaving money to charity in your will?
Lawhive's network of wills, trust and probate solicitor's can guide you through the process, ensuring your wishes are fulfilled while minimising inheritance tax liability. Contact us today to find out more.