Leaving money to a charity or charities in your will is such a wonderful way to give back. Here are 7 of the many reasons why you should give in your will!
Leaving money to a charity or charities in your will is such a wonderful way to give back. It may be an organisation you’ve volunteered with or been affected by or just a way to give back to something you’re really passionate about. They could support animals, education, healthcare, social services and lots of others.
Anything you give to charity will be exempt from tax. Furthermore, the amount you give will be deducted from your estate before Inheritance Tax (IHT) is taken out.
For example, you have £350,000 in cash and the IHT threshold is £325,000. This means that your family would usually have to pay the 40% tax on the £25,000 above the threshold. In this instance, that means £10,000 would be considered for tax.
If instead, you donated £25,000 to charity, it would be deducted from the estate before tax is calculated. This would mean £325,000 is left to your family, on which no tax would be paid as it meets the threshold. For a bit more detail about this, look at this article.
Another key consideration is that if you leave 10% of the net value of your estate (the estate’s total value minus any debts) or more to charity, you will cut down your IHT bill. It will drop from the usual 40% down to 36% for the rest of the estate.
If you’re already planning on giving over 5% of your estate to charity then it can make financial sense to actually increase that amount to 10%. Due to the drop in IHT, your family can end up with more money if you give a little extra to charity, as it reduces the amount you have to give to the government.
(The benefits of this will change on a case by case basis and it’s a good idea to work it out before you decide what to do.)
You can either give money to charity via your life insurance or your will. Leaving it in your will may be the better option though. As the tax benefits are better, you can give more than money and you can be more specific about what you want to leave them. You can also leave life insurance to support your family access to funds that can help with funeral costs, paying debts and any taxes.
In your will, you can dictate how your funds are going to be spent. This could be anything you want that is relevant to the charity. It could be a building, a playground or vital research.
If you wanted to do this, it’s a good idea to talk through your ideas with the charity first. That way you can know what steps you should take and what’s feasible. This can also be a good way to have something that you’ll be remembered by.
When it comes to giving to charity, many people assume that it’s going to be a monetary figure. In truth, you can give anything you want. You can give an asset to a charity that they can then use or sell. This could be an expensive piece of equipment they will use, a property, or even artwork. And as we explained above, anything you give will be exempt from your estate for the purposes of valuing it for tax purposes.
There are a vast number of charities out there and many of them have the same, or similar name. With over 370,000 charities registered on the government database, you don’t want there to be any confusion about exactly where you want the money to go. However, each charity has a unique number, so make sure you write that down.
You may want to give all of your wealth and estate to a charity and there’s nothing stopping you from doing that as long as they are in your sole name. It’s your will and you may feel your loved ones don’t need anything, whereas a charity needs it more. The only way it can be contested is if you’ve not made a reasonable financial provision for someone who was financially dependent on you. If someone feels that your will isn’t meeting their needs, they can contest the will and the court will decide what provisions if any, they deserve.
Ultimately, there are so many wonderful reasons to give to a charity in your will. One of our favourite charities at the moment is PaNDAS, which helps offer support, empathy and support for parents and networks affected by perinatal mental illness. Stay tuned for a longer list soon!