What do you know about leaving gifts to charity in your Will?
When a charity is close to your heart, you may well want to leave them something in your Will.
However, if you’re planning to give something to charity, it’s essential you do it the right way and not just so that your wishes are carried out exactly as you wish but also to maximise the benefit to your chosen charity
To help you make sure you do leave your gift in the right way here are a few of the things you should consider:
The charities involved should be notified as soon as possible and if the charity is a residuary beneficiary, they should also be alerted as to the likely administration costs.
Charities have certain obligations in respect of the Charity Law they are governed by. For example, they have to meet certain requirements in situations where land is being sold on their behalf. So, if you are planning to gift something other than money, you may want to consult with your charity to make sure they can meet all of the relevant legal demands.
Before making the decision to sell assets from an Estate, have a think about whether it might be better to transfer those assets to charities before they are sold. Charities are exempt from Capital Gains Tax (CGT) as long as the proceeds of the sale are used for charitable purposes.
Charities can also reclaim the Income Tax paid on most of the income received by an Estate during the administration period. If you are an Executor of the Will you’ll need to provide a signed certificate of income to each Charity beneficiary using Form R185 (Estate Income). Charities will usually not class the administration as complete until they have received the R185.
Legacies to Charities usually enjoy a full Inheritance Tax Exemption.
This can, however, give rise to problems where a residuary estate is to be divided between exempt and non-exempt beneficiaries so Executors need to carefully consider how an estate is to be divided if there are a mixture of exempt and non-exempt beneficiaries.
You should also bear in mind that the Inheritance Tax rate drops from 40% to 36% if 10% or more of a net Estate is left to charity. You may want to put a Deed of Variation in place so that you benefit from the reduced rate, especially if your Will already includes a number of charitable gifts.
These are only a few of the things you’ll need to consider if you are planning to include a legacy for a charity in your Will.
You should also watch out for these if you are the Executor of a Will that includes charitable gifts.
However, as every set of circumstances is different we’d always suggest that you speak to an experienced solicitor before you make any decisions as you need to understand all of the potential tax reliefs and legal ramifications so that your charity and its beneficiaries enjoy the highest possible benefit from the gift.
If you are planning to leave a gift to charity or you are responsible for executing a Will that includes gifts to charity and you have any questions, please email Natalie Sheldon at firstname.lastname@example.org or call Natalie on 0114 290 6248.