Christmas is a time of giving but as we begin the New Year I want to reflect on the importance of charitable legacies in wills. Many charities, especially those in Northern Ireland, rely heavily on legacies for their income and this is felt even more acutely in the current economic climate when charitable donations are down somewhere in the region of 12% overall in the last couple of years.
Charities can do a tremendous amount of good work with the money they receive from legacies and whilst larger gifts can often enable them to undertake large projects and capital expenditure, smaller legacies are just as important for their cash flow. Charities also benefit greatly from knowing in advance when their supporters are planning to include them in their wills and often operate pledger schemes whereby those supporters can become more actively involved and see first-hand the work done with legacy money. For anyone who has been actively supporting a charity during their lifetime, leaving a legacy is a perfect way to complete that relationship.
Legacies can take different forms. A ‘pecuniary’ legacy is a gift of a fixed sum, say £1,000.00 or £10,000.00 and this can be index-linked in your will if desired to help guard against the effects of inflation. A ‘specific’ legacy is one where an asset is left directly to the charity concerned, for example a house or land, or a portfolio of shares. It is also possible to leave a ‘residuary’ gift which is a share of what remains in the estate after all other debts and legacies have been paid. It is fair to say that, whether large or small, all such gifts are gratefully received by the charity or charities concerned.
There are also tax advantages to charitable giving by will. Any gifts passing to charity on death will be completely free of inheritance tax and, following changes introduced in the 2011 Budget, where 10% or more of a person’s estate passes to charity the effective rate of inheritance tax on the chargeable portion of their estate is reduced from 40% to 36%. It is important to note that this relief applies where 10% of the net estate (i.e. after deduction of all debts, other exemptions and the nil rate band (currently £325,000.00)) passes to charity, so the rules are more generous than they might appear at first. For those who have already incorporated charitable gifts into their wills it could be well worth reviewing those arrangements to see if it would be appropriate to amend them to avail of the new rules as family or other beneficiaries could benefit from this.
Will to Give has as its members a large number of local and national charities and also has the backing of the Law Society of Northern Ireland. Anyone who is interested in the work of Will to Give or who wants to know more about charitable legacies generally should visit their website at https://willtogive.org.s214960.gridserver.com/