Leaving gifts to charities in your will
Why leave a gift to a charity in your will?
Most charities rely heavily on gifts received from their supporters when they die. Without such gifts many charities simply wouldn’t exist.
Making a gift to a charity can also be attractive from a tax point of view.
How can I leave a gift to a charity?
If you wish to make a gift to a charity when you die it is vital that you make a will. In making a will you can make a gift in one of the following ways:
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by leaving a fixed sum of money or a specific item, for example a property, in your will;
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by leaving a proportion or all of your “estate” (your assets, property and personal belongings) once any specific gifts, debts, taxes and expenses have been paid.
When leaving a gift to a charity you should make sure that the full details of the charity are set out in your will, particularly if the charity is not well known. The full name of the charity, its registered address and its registered charity number should be stated. If you wish to leave a gift to a local branch of a charity or for a specific purpose this should also be stated.
Sometimes charities change their name or are amalgamated with other charities and it important that your will makes provision for this.
Many charities have published some suggested wording for including in a will.
What are the tax implications of leaving a gift to a charity?
Inheritance Tax is a tax which is payable by the estate of a person when they die if their estate is above the Inheritance Tax threshold. Inheritance Tax is also payable sometimes on gifts or trusts made in the seven years before a person’s death.
For the tax year 2010-11 the rate of Inheritance Tax payable is 40% and the threshold is £325,000.
Normally gifts made to charities are exempt from Inheritance Tax. For the exemption to apply the charity must be a “qualifying charity” (a body of persons or trust established in the UK for “charitable purposes” only). The definition as to what amounts to “charitable purposes” is complex and if in doubt you should obtain legal advice.
If you leave a gift to a qualifying charity in your will, the value of the gift will be deducted from your estate before Inheritance Tax is worked out.
By leaving a gift to a charity it may, therefore, be possible to avoid your estate having to pay Inheritance Tax all together or to minimise the amount of Inheritance Tax payable.