Clearly, an individual will often look to provide for a charitable cause simply to leave a lasting legacy for something which is close to their heart, aligns with their own personal values, or to help progress a matter which has impacted on themselves, or those close to them, during their lifetime. 

However, there are other considerations which can be taken into account when, and potential benefits which can arise from, including a charity beneficiary within your Will.

The first of these benefits, and perhaps the most straightforward concept, is that of Charity Exemption. As a result of Charity Exemption, the value of any gift made to a qualifying charity will not attract Inheritance Tax (IHT). The value of such gift will be deducted from the value of a deceased’s estate when any IHT is calculated.

In addition to this, and where an estate is liable for IHT, it is possible for an estate to benefit from a lower rate of IHT in particular circumstances. These are when an individual leaves 10% or more of their net estate to a charity, or charities. If this were the case, any IHT liability will be taxed at a rate of 36%, rather than the standard 40% rate which is levied against an estate normally.

It is important to highlight, however, that it is crucial to take expert legal advice when considering making such a gift within your Will. Firstly, careful drafting is often required in order to ensure that the provision is made correctly. Secondly, careful thought needs to be made regarding the composition of an estate. It can sometimes be the case that other beneficiaries, such as family members, end up receiving less from an estate, compared to a charity beneficiary were not included in such a way. This is taking into account any IHT due, plus the 10% of the net estate which is being directed to a charity or charities.

Of course, and as referred at the beginning of this piece, often the motivation for including charitable institutions within a Will is based on a more personal, and altruistic, standpoint. Looking to assist, and often raise awareness for, organisations which work in areas which mean a significant amount to you.

The ways in which you can remember a charity within your Will, whatever the motivation, varies and can be tailored to each individual. Some examples of how a charity could be remembered within a Will would include:

• Specific Legacy – People regularly leave all, or certain, personal items to charities. Such a gift allows the said charity to sell on the items received, the proceeds of which will be theirs to use towards their charitable causes.

• Pecuniary Legacy – Another common way of remembering a charity within a Will would be a set cash gift, also known as a Pecuniary Legacy. With this option, an individual would leave a set amount to pass to a charity, or charities.
  
  This amount would often remain the same, regardless of the size of an individual’s estate at the time of their death, and indeed inflation. Further, such legacies are normally paid in priority to the residue of an estate, referred to below.

• Residuary Gift – To name a charity, or charities, as a Residuary Beneficiary of an estate would mean that they could receive all, or a percentage, of an individual’s remaining estate.
  
  The residuary estate would normally constitute “the bulk” of an estate. Being the remaining estate after the distribution of any Specific or Pecuniary Legacies, along with the settlement of any liabilities at date of death, funeral expenses, administration costs, and IHT.

As touched on above, when considering including a charitable provision within your Will, and indeed when considering making a Will in general, it is sensible, and often crucial, to take expert legal advice as to how exactly you make such provision. 

There are various matters which will need careful thought. Such as how exactly you may wish to provide for a meaningful charity, and assessing the composition of your estate, and any potential IHT liability, when looking to benefit from the reduced rate of IHT.

Please do not hesitate to contact Ward Gethin Archer, who would be more than happy to assist when considering your Wills, estates, and the inclusion of any charities within your last wishes.