Leaving a Legacy to Charity
Live like a billionaire: leave a gift to charity in your Will
Over the next 30 years, over $30Trillion of wealth will pass via inheritance from the ‘Boomer’ generation to the next in the USA alone.
But alongside this massive transfer of wealth, more and more self-made millionaires (and billionaires) are opting to leave the bulk of their Estate to charity.
Business people and celebrities, from Bill and Melinda Gates, to Sting, have announced their desire for their children to stand on their own feet, and not live in expectation of a huge inheritance (although with the Gates’ rumoured to be leaving ‘only’ $10m apiece to their children, we suspect that they might be just about okay).
Even if you’re not a billionaire, you might still wish to leave some or all of your Estate to a charity of choice. And luckily, the UK is one of the few countries in the world where you can leave your estate where you wish, provided you have made a careful and legally watertight Will.
So if you do decide to leave money to charity in your Will, what steps do you need to take?
Decide what kind of legacy to leave
There are three types of bequest you can make to the charity or charities you have chosen:
- Pecuniary: a fixed sum from your entire Estate. Keep in mind that with inflation, the value of your bequest may fall. You should regularly update your Will, or perhaps tie the sum to inflation, if you want to keep the value of your legacy consistent.
- Residual: a set percentage of your Estate, after other beneficiaries have received their inheritance, can be left to the charity you choose.
- Specific: perhaps you want your chosen charity to benefit from the income of a particular Trust, piece of property, or even intellectual property (like JM Barrie’s famous legacy of the Peter Pan rights to Great Ormond Street Hospital).
There can be pitfalls to leaving a percentage, rather than a fixed sum, to charity. Charity’s are large and well-funded organisations with extensive access to legal advice. Some will feel it their duty to aggressively pursue the best deal for their charity client.
If you leave a percentage bequest, then you could be leaving a headache for any friend or family member that you have appointed as executor, as a charity may aggressively challenge every part of the process, to ensure that the Estate is valued to its maximum (and therefore maximise the amount of money that comes to them).
So it is advisable to stick to a fixed sum bequest (and you can update that sum regularly, if you want to keep up with inflation, or if your circumstances change).
If you really would prefer to leave a percentage of your Estate, it is strongly recommended that you appoint a professional executor, independent of any benefactors, to see off disagreements or unnecessary wrangling and stress for your loved ones.
Plan for Inheritance Tax Benefits
If your estate is likely to go over the Inheritance Tax threshold then your family could benefit too from your charitable legacy.
With the rise in property values over the last 25 years, many of us have been pushed over the IHT threshold without even realising it (even taking recent events into account!).
And if you have life insurance or a ‘death in service’ policy, that mortgage albatross could be transformed into a valuable asset when you are gone.
You could grant a bequest large enough to take your entire estate under the threshold or, if you have a large exposure, leaving 10% of your Estate to charity can reduce your IHT liability from 40% to 36% tax levied on the amount over the threshold.
Get appropriate advice – from an appropriate person
Although many charities will offer free Will Writing services, or assistance with writing your Will, you should be very wary of having any representative of the charity itself help you with the wording of your Will, being appointed as executors or trustees, or witnessing the Will itself.
If the charity appears over-involved, it could open them up to accusations of ‘undue influence’ after your death and the Will could be open to challenge.
So see a legal professional, like a qualified Will Writer, and preferably one who is unconnected in any way to your beneficiaries. They can advise you on the best way to structure your Will and Estate Plan, and ensure that it is executed legally, thus minimising the chance of any Will contests after your death.
Prove your links to the charity you have chosen
Since the case of Melita Jackson, it has become even more important to demonstrate in the writing of your Will, why you have chosen to leave your Estate where you have.
In the case of willing an inheritance to charity, this will mean including in the Letter of Wishes that can accompany your Will, your connections to that charity.
Have you done work on their behalf? Fundraised for them? Have they assisted you or a family member in times of need? Have you suffered from an ailment that they conduct research into, or support sufferers of?
Although not legally required, such evidence of connection will support and help uphold your wishes after you are gone, should there be a challenge from anyone who feels they have been excluded from your Will.
So with the right advice and careful planning, you too can live like a billionaire – and leave a gift to charity in your Will.
For more information get in touch with us at Just Wills and Legal Services on 01342 477102 to book a free consultation.
This article is for general information only and does not constitute legal advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.
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