CHARITABLE GIVING IN WILLS

15/07/2010

Polly Hosier of our Legal Department explains common pitfalls that can occur when leaving legacies in Wills, and how best to avoid them to ensure your gift benefits your beloved cause.

A gift in your Will to a charity is a generous gesture, and such gestures are the life blood of charities. Charities rely heavily on gifts in Wills, to the extent that many charities report that 80% of their voluntary donations come from gifts in Wills. In addition, gifts to UK charities (and, now, many EU charities) are free of inheritance tax.

We’d like to think that if you are reading this you are already sold on the idea, and so we’ve set out some information to help you make sure that your charity of choice receives whatever you have decided to donate, whether that is £50 or £500,000!

Make a Will

We recommend seeking the advice of a solicitor or other Will writing professional. There are several schemes offering free Will writing services, in which the usual fee is waived in return for a gift to a charity in your Will, or even provided absolutely free in the hope that a donation will be made. Local Solicitors and some Charities will run campaigns, and national schemes include ‘Will Aid’ and the ‘Remember a Charity’ campaign. If you have a Will already but wish to insert a simple legacy, you may be able to make a codicil, i.e. a formal amendment, to your current Will. Seek advice from a professional to see if this is appropriate in your circumstances.

Get the charity name and charity number right

In your Will itself, it is vital to identify the charity’s name correctly, as many charities have very similar names. Most charities will have a registered charity number, which should be included in the wording of the legacy, and which can be found on the Charity Commission website at www.charity-commission.gov.uk. If you cannot find a number for your chosen charity, it does not necessarily mean that they are not a charity – a few charities are exempt from registration altogether. Also, very small charities, as well as registered places of worship, will not be registered. Check with the charity itself if possible.

Make sure your gift is as flexible as you want it to be

If you would still like your gift to go to the charity even if it has changed its name, or amalgamated with or transferred its assets to another body, your Will writer can include a clause called a ‘Cy-pres clause’ which will facilitate this.

If you are particularly interested in a specific project – for example the building of a local lifeboat station – you may still wish to leave the gift to that charity for its general use if, at your death, the project is finished or no longer needed. You can leave a gift for the charity’s general purpose, but with the wish that it is used on a certain project.

In a similar vein, if you leave money to a local branch of a charity, you may find that that gift is restricted for the use of only that branch, and that if this branch does not exist on your death then the gift may fail. If this is not your intention, your will writer will be able to advise on how to leave a gift so that use of the funds is unrestricted.

Leave the choice to others if unsure

If you want to benefit a charity but are unsure which charity to choose, you can leave a gift in your will and allow your Executors or Trustees discretion to choose. Be aware though that your Will is a public document once it has gone through the Probate process. Many charities are informed when gifts are left with a discretion to choose the charitable recipient. Your Executors or Trustees may be inundated with requests from charities, which may be upsetting if your Executors are close family or friends. An alternative is to leave an amount to the Charities Aid Foundation (CAF). In this way, CAF will be named in your Will and a letter of wishes written by you, which will remain private, naming charities whom you wish to benefit. This means that you can retain flexibility in your lifetime. You could also name a charity as a beneficiary in any Discretionary Trust, which again will leave the choice to your Trustees.

Talk to your nearest and dearest

It may help to advise your family of what you are doing, so that they know that this is what you wish to do. This is probably more important the larger the gift to charity is in proportion to the size of your estate.

Although we have testamentary freedom in England and Wales, there may be challenges to your Will if you have not provided for those for whom the law considers that you should have provided. It is best to seek further advice if you are considering making substantial gifts to charity and you feel that this may be challenged on your death. It is not possible to prevent claims against your estate being made, or to prevent others from challenging the validity of your Will, but you can minimise the risk by seeking professional advice and making sure that your Will is properly drafted and executed, and that the process is overseen by a professional who will document such matters in case of future challenge.

Charities can act as Executor where necessary

If your main or only beneficiary is a charity or charities, it may be fairer to appoint them as Executor rather than a lay person. Charities can deal with the estate themselves or appoint their chosen representatives to do so for them.

Still unsure? Charities may appeal more than the government or a stranger as a last resort!

If your priority is friends and family, you can name a charity as your last resort beneficiary. You may prefer this to the alternative outcomes where you die without beneficiaries, for example if your estate passes under the rules of intestacy, which could see your estate passing to a very distant relative whom you do not wish to benefit, or failing that the government.

And finally.....

If you are leaving substantial gifts to charity and also substantial gifts to others, there could be potentially complex tax consequences. In this circumstance, make sure you seek proper advice and that you understand where the burden of the tax will fall.

For further information, or for advice on estate administration, please contact us.