2 minute read
Leaving A Legacy To Charity
Five Things To Consider When Leaving A Legacy To Charity
Leaving a legacy to charity has never been more important but –like so many other aspects of making a will – it pays to plan ahead where possible. This is especially true in the pandemic. Some families built up savings during lockdown; not a bad problem to have, you might think. But this extra money can have an impact on your Inheritance Tax (IHT) liabilities…
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1. Has Your Estate Grown Under Lockdown?
As I wrote in a previous article, if you donate 10% (or more) of your net estate to charity, the IHT liability on what remains drops from 40% to 36%.
But here’s the issue: while the bequest is fixed, the value of your estate may have grown during lockdown because you had fewer opportunities to spend money. So it pays to review your will to ensure your charity bequests still represent at least 10% of your estate. You may need to increase them to ensure they will still trigger the IHT reduction.
2. Potentially Exempt Transfer (PET) Time Limits Don’t Apply To Charity Bequests
Using Potentially Exempt Transfers, you can make gifts to people at any time: those gifts will be free of IHT (usually 40%) if you survive another seven years. But gifts to charities are exempt from this seven-year rule. No IHT is due – even if, sadly, you do not survive seven years after making the gift.
3. Dying Without A Will – The Intestacy Rules
If you die without a will, the Intestacy Rules will govern what happens to your estate. They set out which surviving relatives can legally benefit from the estate (and by how much).
So if you wish to leave a bequest to charity – even a small amount –you must have a will in place to ensure your final wishes are carried out.
4. How To Stop Your Charity Bequest Being Contested
Unfortunately, more wills are being disputed these days. Some of these cases are brought by large charities (with high running costs). So if you want to ensure your money goes to the small local charity of your choice, it pays to: Write a legal note to accompany your will. This helps to make your wishes clear. It also explains your reasoning discreetly; a will is a public document but the note is not.
Make small regular donations to your chosen charity. This establishes a pattern that can be taken into account by a court should your will be disputed.
5. Small Charities Need Your Help More Than Ever
Covid-19 lockdown regulations have forced many charities to cancel or postpone essential fundraising events. So this year, bequests are more important than ever.
Small charities like Forest Holme don’t have huge cash reserves like their larger counterparts. They serve their local communities – not the whole country – so they rely on donations and bequests from smaller groups of supporters. By supporting small local charities, you can see the real difference your help can make. Your donation or bequest wouldn’t just disappear into a big national fund – where it could so easily get swallowed up by administration costs or expensive TV advertising. Your kindness would bring muchneeded help and comfort to local people when they most need it.
