I Want to Leave a Gift to Charity When I Die – Can I Do This?
Many people would like to leave something to charity when they die. It can be satisfying to allow a charity, which means something to you, to benefit when you are gone. It can even help reduce any tax payable on your estate.
How can you be sure it will reduce any tax? Our Wills and Probate team at Simpson Millar LLP are here to answer your questions.
What Do I Need to do to Make a Gift?
To leave a gift to charity when you die you'll need to include the gift in your Will.
First, check that the charity you wish to benefit is registered. The Charity Commission has a ‘find a charity'
search tool, to find the official charity name, address and registration number. It's important to check that the charity you've chosen has registration and tax exempt reference numbers to make sure they can actually accept your gift, as some charities aren’t able to
. If you already have a Will, but would like to include a charity, or if you've changed your mind about the charity you have already included, you need to be sure to update it.
Does it have to be Cash?
Your gift doesn't need to be cash. You have a choice; there are 3 different kinds of gifts:
- Pecuniary – This is when you leave a cash amount, the most common type of gift.
- Specific – This can be a house, shares, a painting or your favourite book!
- Residuary – This is what is left after your funeral and debts have been paid and any pecuniary or specific gifts have been dealt with.
Will my Gift to Charity Allow my Estate to Claim Tax Relief?
Each person can have £325,000
when they die before they have to pay any tax. If you’re married or in a civil partnership, that is doubled, allowing you to have £650,000
as long as you leave everything to each other. Anything above the £325,000
is subject to tax (Inheritance Tax) at 40%.
Gifts to charities do not attract Inheritance Tax, giving you the comfort that you are helping a cause close to your heart, but also preventing the Treasury from having that 40%.
If you want to leave something to charity, be sure that you include receipt and substitution clauses. The first of these allows the treasurer or appointed officer of the charity to sign a receipt for the gift, but more importantly,
the substitution clause covers what would happen if the charity you have left something to doesn’t exist when you die, or has merged with another charity and changed its name. Would you want a completely different charity to receive your gift, or a charity which is similar to the original one?
You also need to be sure that the type of gift you want to make, pecuniary, specific or residuary is the most tax efficient way of doing it. If you make the wrong type of gift, depending on the value of your estate, you could lose the tax advantage all together.
Will My Family Benefit from Tax Relief?
If you leave 10%
or more of your estate to charity, the Inheritance Tax rate faced by your family on anything over £325,000 will be reduced from 40% to 36%.
This tax relief can make a huge difference to the amount your loved ones inherit if you have a very large estate.
If you're thinking about leaving a gift to a charity in your will, it is always advisable to get the right legal advice. Our team at Simpson Millar LLP can help you make a Will, or amend an existing one to make sure that a gift to charity is dealt with in the best way, ensuring both the charity and your estate benefits.