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If you’ve ever been moved by the incredible work charities have done in your local area, or you’ve benefited directly from their support, you’ll understand precisely the profound positive effect they can have on people’s lives.
Many excellent charities rely solely on donations from generous benefactors, and one way you can provide much-needed support is through your will.
According to Today’s Wills and Probate, charitable legacies are on the rise, with over 38,000 charitable estates found in wills in 2023, the highest number ever recorded.
If you’re thinking of leaving some of your wealth to a charity in your last will and testament, continue reading to discover some unexpected benefits.
1. You could reduce the rate of Inheritance Tax your loved ones pay
Leaving money to a charity in your will is doubly beneficial, as not only can you support a cause you care about, but you could also potentially reduce the amount of Inheritance Tax (IHT) your loved ones will have to pay on your estate.
If you leave at least 10% of the value of your estate to a charity in your will, the rate of IHT your loved ones pay could drop from 40% to 36%.
This is provided that you leave your gift to a qualifying organisation, such as a:
UK-registered charity
Community amateur sports club
Political party.
Your bequest could make a considerable difference to both the charitable cause and your loved ones, as it could mean a smaller tax bill, all while supporting a worthy cause.
2. It could lower the value of your estate and minimise an Inheritance Tax bill
In the 2024/25 tax year, the IHT nil-rate band – the threshold below which no IHT is typically due – is £325,000.
Additionally, you may be able to use the residence nil-rate band, which stands at £175,000 in 2024/25, if you leave your main home to a direct lineal descendant.
If you’re part of a couple, you can also pass unused allowances on to your spouse or civil partner, potentially allowing you to leave up to £1 million of your estate before IHT is due.
While this does seem like a substantial sum of money, once you start factoring in all of your assets, particularly any property, you may find that you’re closer to the threshold than you initially thought.
There are many ways you can reduce the value of your estate, one of these being leaving gifts to charity. This is because the value of a charitable donation is typically removed from the value of your estate before IHT is calculated.
As such, you could use a charitable gift to bring the value of your estate below the IHT thresholds to reduce a potential tax bill so your family can put your wealth to good use.
3. You could support a cause that is important to you
While the potential IHT benefits of charitable bequests are certainly worth considering, the true power of leaving money to a good cause in your will lies in the ability to create a lasting positive change.
There are countless charities working tirelessly on a vast array of issues, ranging from specific health issues and ailments to environmental protection and animal welfare. With so many different charities out there, it can be challenging to decide which to donate to.
Interestingly, a report from the Charities Aid Foundation found that 32% of people choose a charity to donate to based on their personal experiences.
So, if a charity has ever helped you through a difficult time, or you’ve witnessed the positive effect one has had in your community, leaving a portion of your wealth to them could be a powerful way to return the favour and ensure their vital work continues.
The influence of family and friends might also play a role in deciding which charity you leave money to, as 28% said their loved ones were a motivating factor. As such, a charitable gift could be a meaningful way to honour your loved ones’ passions.
Even after you’re gone, you can continue to make a positive impact on the world. This is especially relevant considering many charities rely solely on donations, including those left in wills.
For instance, Guide Dogs for the Blind reveals that almost 2 in 3 of its guide dogs are funded through gifts left in wills.
Unfortunately, Today’s Wills and Probate highlights that UK charities lose millions in potential income, simply because people forget or neglect to include bequests in their wills.
Just think about the effect your charitable gift could have. For example, a donation to a medical research charity could help fund groundbreaking research that leads to a cure for a debilitating disease.
Moreover, a gift to an educational charity could support children in need and open doors to a brighter future.
So, next time you’re writing or reviewing your will, this could be the ideal chance to leave some of your wealth to a charity and make a real difference.
Get in touch
We’ve brought in an experienced new colleague, Olly Biswas, to manage our long-awaited Will Writing and Lasting Power of Attorney services. So, if you need to write or review your will and you’re considering leaving a charitable bequest, then Olly is the perfect person to ask for guidance.
Email info@athertonyork.co.uk or call us on 0208 882 2979 to find out how we can help you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, Lasting Powers of Attorney, or will writing.
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