Leaving money to charity in your will

Jan Atkinson

Why leave money to charity in your Will?

Leaving money to charity in your will is a significant source of income for UK charities, with billions of pounds donated each year through charitable bequests. Last year, around 12% of people in the UK included a charitable donation in their wills, with an average of £92,000 per donation.

Leaving money to charity in your will is often motivated by personal connections to a cause or charity, and people often choose to leave a legacy to make a lasting impact on people’s lives and communities. The most common types of charities mentioned in wills are medical research, animal welfare, and children’s charities.

Do I pay tax on my donation?

“There are also inheritance tax advantages associated with charitable bequests, allowing you to increase the amount you are able to pass on. If you leave 10% or more of your estate to a UK-registered charity, not only is the amount you give to charity free of inheritance tax, but the rate of tax on the rest of your estate is 36% instead of 40%.

“For example, if you leave an estate with liquid assets of £500,000, normally inheritance tax would be due at 40% on £175,000 of that, so your estate would have to pay £70,000 in inheritance tax. However, if you left 10% of that estate (£50,000) to charity, then the value of your chargeable assets would reduce by £50,000 and inheritance tax would be due on £125,000, but at a reduced rate of 36%. This means that your estate would only have to pay £45,000 inheritance tax.

“If you already plan to give at least 4% of your estate to charity, it’s worth considering increasing that gift to 10% so that the charity and your beneficiaries receive more.”

Can my family contest donations in my Will?

Jan warns it is important to let your family know of your plans in advance to avoid costly disputes arising from your will.

“When a parent unexpectedly donates a large proportion of their estate to charity without informing their family members, there is a danger that they contest the will, particularly where children were expecting a large inheritance or where estranged family members are cut out of a will in favour of a charity.

“The Inheritance Act 1975 means that if your will does not provide reasonable financial provision for any financially dependent family you may have, a family member or partner could contest a charitable gift to get the financial provision, they feel they are entitled to. Fighting such actions can be hugely costly for the charity and the family.”

How do I leave a gift to charity in my Will?

1. To take advantage of tax advantages, make sure you choose a charity that is registered in the UK.
2. Decide on the type of gift. This can be a specific sum of money; an item such as shares or property; or a percentage of the remainder of your estate.
3. If you have an existing will, you can rewrite it or update it (make a codicil). If you don’t have a will, it’s a good time to make one.
4. If you are giving to charity, you have likely put a lot of thought into where you would like your money to go so you will want to ensure your wishes are followed.

Jan says, “If you are giving to a large charity, you may want to stipulate what your donation is to be used for.  For instance, you might want to give to Cancer Research but would like your money to be used in research relating to a particular type of cancer.  When making your will, it is possible to stipulate that the bequest is contingent on the money being used for a specific purpose, but it is worth checking with the charity first to make sure it will be possible to use the money in the way you wish.”

5. Speak to a wills solicitor to ensure your will is valid and that your wishes are clearly understood.

Should I set up a charitable trust?

A charitable trust can provide ongoing support to charities over a longer period. You can specify conditions or projects that the funds should be used for, and appoint trustees to ensure these conditions are met. Find out more about setting up a trust.

Contact Osbornes Law

If you have any other questions about leaving money to charity in your Will, our solicitors are here to help. Speak to us on 020 7485 8811 or fill out the contact form below to find out more.