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Many charities offer a free-will service and also have schemes to care for pets after their owners have gone into care or died. charities-abc has more information. The money you leave to charity is tax-free!
UK tax policy encourages people to leave money to charity, and more than 150,000 charities in England and Wales will happily receive your largesse. Charities are reliant on gifts - and on rules allowing most legacies to be free of inheritance tax.
Gifts made to a UK charity either before you die or in your will are usually exempt of inheritance tax. Some charities are not exempt of IHT. It pays to double-check.
SEE ALSO...
For legal disputes involving charities: Gill v RSPCA Charity Cases
For case studies of people who gave to charities: Mona Webster Margaret Allen
IHT exemption means that if your estate is worth £500,000 and you leave £100,000 to a qualifying charity, your estate's value for tax purposes drops to £400,000. It is simple subtraction: you deduct the amount of the charitable gift from the value of your estate. The charity gets the full £100,000, with no tax at all to pay. And the taxable part of your estate is reduced by £100,000.
There is a potential downside to paying less tax: your estate reduces by the amount of the gift. You have less money to give to others.
The balancing act between family and friends on the one side, and charities on the other, can be tricky, as the relatives of Leeds GP Stanley Somers discovered.
Chancellor Cheers charities - 23 March 2011
if you leave 10% of your estate to charity, your inheritance-tax rate will be reduced by 10%, beginning April 2012.
So you have extra incentive to give to charities, but the reduction is ten per cent of 40, not ten per cent of 100.
how much of a stimulus will an iht rate of 36% prove to be? time will tell.
Pecuniary bequests You pledge money (a specific sum or a percentage of your estate) to a particular charity.
Residuary bequests The amount that remains after the gifts, bequests and some expenses are accounted for is the residue. One or more charities can share the residue. The word 'residue' may suggest leftovers, but the residue can be substantial - larger, even, than the sum of the individual gifts.
Many charities provide templates showing donors the correct language to use in their wills. This example, from Age UK, distinuished between pecuniary and residuary bequests, and also notes that distinctions exist between, for example, national and local charities.
Many charities offer a free will-writing service. If you use it, must you give a gift to that charity?
The short answer is "No." If you use a free service provided by a charity, you should be able to write the exact will that you would compose if you were not using the charity's service. Charity Commission guidance provides considerable protection for testators who go this route. Free charity wills has more information.
Charities can merge, even die. If you leave a gift to a charity that merges and changes its name, your gift might fail - so anyone interested in leaving a gift to Age Concern or Help the Aged should be aware that these venerable charities merged and are now Age UK.
Similar problems arise if the charity ceases to exist - the entity you named can't afford to remain in business, shuts its doors and simply is not there any more.
When you write your will, it is important to include the precise name, charity number and other details regarding the charity in question. It is also prudent to provide for alternatives in the event that the charity you specify no longer exists when you die.
Instead of, or in addition to, naming a specific charity in a will, you can add a clause indicating that the gift should go to charities of a certain sort - benefitting cancer research or cats, for example. But if you want your gift to go to a specific charity such as the Barsetshire Budgerigar Bathhouse, you must cite this organisation by name (and provide its charity number and other information). If you specify Budgie Baths, your gift might fail.
If you wrote your will more than five or ten years ago, re-read it to see if it need updating.
Margaret Allan (1917-2007) left a comfortable sum for the care of her cat.
Bird-watcher and opera lover Mona Webster gave generously to animal charities and opera houses.
Stanley Somers wrote a will with the help of a charity advisor, then wrote a new will without a charity advisor a few years later. It got ugly.
Society photographer Reginald Forester-Smith left £400,000 to The Girl Guide and Scouting Association of Dumfriesshire. Nothing unusual about that except that Forester-Smith had been jailed for eight years for sexually abusing three young girls. In his million-pound-plus will, Forester-Smith, who died in 2009, also gave generously to Cancer Research UK, the Macmillan Nurses Cancer Association and other charities.
'There are approximately 300,000 charities in the UK employing over half a million people and contributing £12 billion of economic activity.
The total cost of tax reliefs for charities in the UK is estimated at over £2 billion, comprising £1.2 billion of direct taxes, about £200 million in VAT reliefs, and £600 million in business rate relief.'
House of Commons Research Paper, "Taxation of charities," 12 April 2001
"One deposit of 9,312 kronor had been made the previous autumn. That was the inheritance from her mother.
Salander withdrew 9,300 kronor. She wanted to spend the money on something that would have made her mother happy. She walked to the post office on Rosenlundsgatan and made an anonymous deposit to one of Stockholm's crisis centres for women."
Stieg Larsson, The Girl who Played with Fire (2006)
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