The number of people leaving donations worth over £1m to charities in their Will has increased by 31%, according to HMRC data. The donations made by people known as high net worth individuals (HNWs) has increased from 2,328 in 2019 to 3,043 this year.
Considering that charitable donations in Wills are the “largest single source of voluntary donations”, this will no doubt provide critical aid to charities who are facing the hardest-hitting year they have ever experienced. Given the current climate, the boost in substantial donations has provided charities with a much-needed lifeline to enable them to keep operating and providing their vital services to communities across the country.
This rise in donations in Wills is not, however, exclusive to the very wealthy: charities have been benefiting from the generosity of people from all wealth levels who leave gifts in their Wills. Matthew Langdon, CEO of Institute of Legacy Management said that “this is testament to the joint efforts of charities, sector bodies such as ourselves and Remember a Charity, and the Will writing profession in promoting charity legacies as a form of giving.”
One key reason for the increase in donations from HNWs could be the financial incentives. The gift itself is free from inheritance tax and also reduces that amount of inheritance tax due on the rest of the estate. “Continued growth of large legacy gifts clearly shows just how powerful that incentive can be, particularly for those whose estates hover just above the inheritance tax threshold” said Rob Cope, director of Remember a Charity.
While charitable donations upon death are always welcomed and do provide a financial boost for charities, HNWs are urged to consider switching to donating their money throughout their lifetime, rather than waiting to donate a lump sum to charities in their Will, especially as the charity sector is in urgent need of help during the Covid-19 pandemic.
How Can I Leave Money to Charity in my Will?
There are two ways that you can leave money to a charity in your will: you may either choose to specify a particular charity or charities that you would like to make a donation to, or you can let the trustees of your Will to decide.
If you would like to donate to a specific charity, it is always best to include the registered charity number to ensure that the donation is made to the charity you have chosen. If you want to let the trustees choose the charities, it is highly recommended that you leave clear instructions of how they should decide or what you would like done to help them make the decision.
Your gift can be made up of a lump sum, a particular piece of property or any percentage of your residuary estate. You can specify how the charity uses your gift, but make sure that you have discussed this with the charity beforehand, so that you can ensure they will be able to comply with the conditions you attach.
A family member may be able to contest the gift you have left to a charity if it is considered that you have not provided reasonably for any financial dependants you may have. They may also claim that you did not have sufficient capacity to make the gift.
What are the Tax Laws Surrounding Charitable Donations?
If you leave something to charity in your Will, it will not be included in the total taxable value of your estate. You could also cut the Inheritance Tax rate by around 4% if you leave at least 10% of your total estate to charity. Please note that this is a basic explanation of how charitable gifts left in Wills can work. For more information, help with planning for Inheritance Tax, preparing a Will or reviewing a Will, please do not hesitate to contact us. You can call (01793) 296118 or email email@example.com