Leaving Money to Charity in your Will: A Guide

Have you ever considered leaving money to charity in your Will? Donating to a charity under your Will is a great way of showing support to a worthwhile cause. It can also be an effective way of reducing your inheritance tax liability so that your loved ones can get the most out of their inheritance. Find out about the positive impact that leaving a charitable legacy in your will can have, as well as the tax implications, and how to go about setting up a charitable gift as part of your last Will and Testament.

What are Charitable Legacies?

Charitable legacies refer to gifts of money, property, or other assets, which are left to a charitable organisation as part of a person’s Will. These testamentary gifts, sometimes called “bequests”, will be transferred to the named organisation upon a person’s death, following the terms outlined and in the amount specified in their Will. 

Charitable legacies can be transformative, especially for smaller charitable organisations, and is a great way to leave a lasting legacy that aligns with your values and beliefs. These funds or assets can finance critical missions or charitable acts. For instance, 60% of the Royal National Lifeboat Institution’s (RNLI) voluntary income is from charitable legacies, which enables them to launch more vital rescue missions, saving countless lives in the process. 

If you have a charitable cause that you’re passionate about, leaving a legacy is a great way to support a charitable organisation, which has a tangible impact on their ability to do good. For instance, if you choose to leave a legacy to Battersea Dogs & Cats Home, your gift could enable the care or rehoming of countless animals. From end-of-life charities such as Marie Curie, to charities tackling homelessness like Shelter, many organisations have guides on how to donate to them through your Will.

What are the different types of charitable legacies?

While the most common way to provide a testamentary gift to a charity is by leaving a sum of money, there are other kinds of testamentary gifts that you can leave to a charity. These are:

• Pecuniary Legacy – a gift of a sum of money;
• Specific Legacy – a gift of specified property i.e. your house, jewellery, or other personal property; or
• Residuary Legacy – a gift of the whole or a share of your estate after all debts, expenses and other legacies.

Whilst a pecuniary or residuary gifts are often preferred, as they don’t require as much administration on behalf of the charity to accept, you can will assets such as painting or jewellery to a charitable organisation, and even specify how you would like the item to be used. For instance, if you will an expensive piece of jewellery and specify that the charity is free to sell it and use the proceeds towards their works, this wish should be respected as the Will document is legally binding. 

To further ensure your gift is received and used as intended, there are other options such as setting up a scholarship in your name, which a trusted solicitor will be able to advise you on. To find out more about how your legacy can be protected, submit an enquiry via our contact form and a member of our wills, trusts, and estates team will be in touch shortly to discuss your options.

What are the benefits of leaving money to charity in your Will?

As well as supporting a cause that you care deeply about, and contributing towards their mission, there are other reasons to consider leaving a gift to a charity in your will. 

Charitable gifts are exempt from inheritance tax (IHT), and when you leave 10% of the total value of your estate, you can reduce your overall inheritance tax bill. We’ll explain how this works, and how charitable legacies can help you to protect your estate below.

Inheritance Tax Benefits of leaving money to charity in your Will

Assets gifted to charities under your Will are exempt from inheritance tax, which means it does not count towards the total value of your Estate for inheritance tax purposes. This can help to reduce the amount of inheritance tax payable or even eliminate it altogether if the charitable bequests place the value of the Estate below your tax-free threshold (currently £325,000 or more for married couples or those who leave property to lineal descendants such as children).

Moreover, if 10% or more of the net value of your Estate is given to charity, then your Estate might be eligible to pay a reduced rate of inheritance tax of 36% rather than the usual 40%. This means a larger portion of your estate will be protected from IHT and other fees, meaning you can leave more money to your loved ones. 

If you’re interested in inheritance tax planning, and would like to protect your estate from unnecessary fees and tax, you can speak to a member of our expert estate planning team via the contact form on our site. 

Do you pay inheritance tax on money left to charity?

Although inheritance tax on legacy gifts is typically paid from the estate of the deceased, charitable legacies are exempt from inheritance tax. This means that neither the estate nor the charitable organisation will be required to pay tax on any monies or assets left in the will. 

In the case of the estate, inheritance tax will be calculated on the value of the estate without any charitable legacies or other exempt funds being included in the final valuation.

Can anybody leave money to a charity in their will?

Yes, as long as you have made sufficient funds and have left suitable provision for any dependents you may have, anybody is entitled to leave money to charity in their Will. As long as the person:

• Has the mental capacity to create a valid Will;
• Has properly specified in their Will the terms and amount of their legacy, as well as the charity that will benefit;
• Has already made reasonable provision for their financial dependents.

Although anybody can leave a charitable legacy in their Will, there are some circumstances in which the will, and the charitable legacy, may be challenged (for instance if a dependent feels they haven’t been adequately provided for). This may mean that the charitable legacy cannot be distributed, so it’s vital to seek the advice of a solicitor or trusted Will-writing service when creating your Will, to ensure issues such as these are less likely to arise.

How do I donate to charity in my will?

If you wish to make a donation to charity in your will, we strongly recommend having the advice of a trusted solicitor who specialises in will-writing, to ensure that your charitable legacy is bequeathed correctly. In order to make a charitable donation as part of your will, you must:

1. Confirm the details of the charitable organisation. The charity must be registered in the UK, and have a HMRC registration charity number. To avoid uncertainty, you must ensure that the full name of the charity, the charity number and its registered address are all mentioned.
2. Specify the sum of money, or type of gift you are leaving. You can leave a pecuniary gift, which is a specific sum of money, a residuary legacy which is a proportion of your estate, or assets such as property, jewellery, or paintings.
3. Specify how you would like the gift to be used. While not always necessary, if your chosen charity carries out various different activities, you may wish to specify that your legacy should be used to fund a specific action (e.g. lifeboat rescues or cancer research), so that the funds cannot be misused. Your solicitor can advise you on this further. 
4. Include a merger clause. It will also be beneficial to include a merger clause in case the original charity merges with another charity, along with a clause ensuring that the gift can be passed on to another charity carrying out similar work if that charity ceases to exist.
5. Confirm your final Will with your solicitor, and ensure it has been signed and witnessed by a suitable party. Again, your solicitor will be able to advise you on how to finalise your Will, and store it so that it can be accessed easily, and to prevent any disputes upon probate.
6. Review and update your will regularly. It’s important to review your will every three years, or when there are significant changes in your life (e.g. when you become a parent or purchase property). At this time, you should also revisit any charitable legacies you have specified in your will, to ensure that the charity is still operating, their values still align with your own, and you are still satisfied with the amount you are leaving as a gift.

Legal advice for Charitable Legacies from Anthony Gold

If you’re an individual interested in leaving a charitable legacy in your will, our Wills, Trusts and Estate team is here to assist. Our team of experienced solicitors can help you to create your will, ensure your gift is properly included, and advise on matters such as inheritance tax as well. 

Contact us today to speak to a member of the team, or feel free to browse the Anthony Gold blog other helpful articles and guides like this one.