Charities

Generous people, generous government

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.

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.

There is a potential downside to paying less tax: your estate reduces by the amount of the gift. You have less 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.

Margaret Allan (1917-2007) left a comfortable sum for the care of her cat, and bird-watching opera lover Mona Webster gave generously to animal charities and opera houses.

Specific legacy or leftovers?

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.

"Free" charity wills

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, in theory, be able to write the exact will that you would compose as if you were acting entirely independent opf the charity. Charity Commission guidance provides considerable protection for testators who go this route. Free charity wills

What if the charity 'predeceases' you?

Charities can merge, even die. If you leave a gift to a charity that merges and changes its name, your gift might fail. Similar problems arise if the charity ceases to exist - the entity you named simply is not there any more. When you write your will, 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.

Mini case study: Expiation: Reginald Forester-Smith

The Girl Guide and Scouting Association of Dumfriesshire received a gift of more than £400,000 in the will of a society photographer. Nothing unusual about that except that the benefactor, Reginald Forester-Smith, had been jailed for eight years after being convicted of sexually abusing three young girls.

In his million-pound-plus will, Forester-Smith, who died in 2009, also gave hefty sums to other charities, including Cancer Research UK and the Macmillan Nurses Cancer Association.