Charities depend heavily on donations made to them through Wills. This is a particularly important source of income for charities. Charities often encourage these types of donations through adverting and promotions.
We often ask clients if they wish to make a charitable donation through their Will. Some say that they would like to do this. Did you know there are some tax benefits available if you make a charitable donation in your Will.
What is involved in donating to charity through a Will?
You have three options when it comes to donating to charity through a Will. You can leave a pecuniary legacy, a specific legacy or a residuary legacy.
- A pecuniary legacy is when you leave a specific sum of money or percentage of your estate to a named charity.
- A specific legacy is where you direct that a specific asset is passed to a named charity. This might be some shares in a company or a property or a work of art or an item of significant value
- The final type of legacy is a residuary legacy. This type of legacy deals with what remains in your estate after any specific legacies have been paid out.
It is also very important to make sure you properly name the charity you nominate. We recommend you not only include the full name and address of the charity but also its registration number. We also recommend that you allow your executor discretion to select an alternative charity if your nominated charity no longer exists.
Can I only donate to one charity?
You are not restricted to donating to one charity. That means you can make as many legacies are you like. In addition, you can also mix those legacies. This means you can make a pecuniary legacy to one or more charities whilst making specific legacies and residuary legacies to other charities. You can choose which charities to favour and which should receive what type of legacy.
As well as charities, you can also make donations to Community Amateur Sports Clubs (CASC).
Will you benefit when donating to charity through a Will?
When you donate to charity through a Will there might be tax advantages. If the value of your estate is over the Inheritance Tax (IHT) threshold (currently £325,000), any donation to charity will be deducted from the value of your estate. This can be significant given that IHT is charged at a rate of 40% on the value of the estate over £325,000.
In addition, if you donate 10% of your estate or more, the rate of IHT will be reduced from 40% to 36%. This can be a significant saving in large estates.
How else can a charity gain through a donation in a Will?
When you donate through a Will, if you are a UK taxpayer, you can elect to apply gift aid to your donation. If you apply gift aid to your donation, for every £1 you donate, the charity will gain an extra 25p. Again, when the donation is large, this can be very significant. It also means the charity gains even more without you having to donate more.
To make sure your donation attracts gift aid, there is a form you should complete for this purpose. If you are donating to a charity, you should complete the form you can find here. For donations to a CASC, you should complete the form you can find here.
If you would like to discuss making or changing your Will or donating to charity through a Will, please call us on 0141 647 9851 or click here to email us.
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