Things to consider when leaving a gift to charity in your will

Matthew Ridyard

12 December 2022

Things to consider when leaving a gift to charity in your will

It's not as simple as it first appears, but with Simpwill it couldn’t be more straightforward.

There are a lot of good reasons to leave a gift to a charity in your will, besides the obvious.  It might reduce your inheritance tax liability in addition to supporting a worthwhile cause. 

However, you should give it some thought before gifting a percentage of your estate to a charity. Without preparation, you risk losing more than you intended. 

Here are some things to take into account before including a contribution in your will. 

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1. It doesn’t have to be a lump sum. 

You are not required to gift a fixed amount of money. You might donate a percentage of your estate or certain assets, like an art piece, an antique, or a piece of jewellery. 

You might also leave a reversionary donation, which would be left to your chosen beneficiaries at first and then transfers on to your chosen charity when your beneficiary passes away.

2. Keep in mind the tax benefits 

Inheritance tax (IHT) is not applied to gifts made to charities. IHT is levied at 40% on any estate valued at more than £325,000.

However, you will benefit from a lower inheritance tax rate of 36% if you donate 10% or more of your net estate to charity.

This implies that, in certain cases, increasing your charitable giving might actually reduce your IHT charge, leaving you with a little bit more to leave to your beneficiaries overall. 

However, this is contingent upon both the quantity of your donation and the initial value of your estate. Before making a charitable donation to avoid paying inheritance tax, always seek advice. Ask one of our experts in our live chat option if you wish to find out more about your Inheritance tax options.  

3. Confirm that it qualifies as a charity. 

To make sure a charity is a reputable organisation, it is important to check if it is registered with the Charity Commission. Here, you can search for authorised charity. For charities located in Scotland you can check with The Scottish Charity Register (oscr.org.uk) For Northern Ireland you can check the Charity Commission for Northern Ireland (charitycommissionni.org.uk). 

However, the charity doesn't have to be registered in order for you to get the benefits of the inheritance tax deduction. These benefits are still available even if you donate to your community football team, provided the organisation satisfies the Charities Act's definition of a charity.

4. You provide some guidance with your gift. 

It may be your preference to instruct the charity on the use of your donation to support a particular programme or area of medical research. If so, you should include these instructions in your will. 

Always go through these requirements in advance with the charity. Your requests might not be granted if they are not feasible.

5. Be aware of value fluctuations 

If you commit to a set amount to a charity and prices rise as a result of inflation, you will probably end up giving less than you hoped. 

The amount you leave behind might also be out of proportion if you make a percentage donation in your will and then your estate grows dramatically in size.  Always keep an eye on your estate to make sure you're not distributing more or less than you intended.

6. Take care when leaving a residuary gift 

Some people decide to donate all or part of their residue to charities. This is the estate after all debts, expenditures, and legacies have been fulfilled. 

They might not all get an equal portion, though, if the residuary estate is divided among several persons. A family member who receives the remainder of your residuary estate but only a portion of it to a charity (which is exempt from inheritance tax) may receive less money overall since the tax will be deducted from their share. When deciding what sort of gifts you want to leave, keep this in mind.

7. Check that you have the correct charity information

Many charities have names that are similar. A charity may also change its name or cease operations. 

If you do decide to leave a gift in your will, be careful to clearly state their registration number and address. These specifics are available on GuideStar or the appropriate Charity Commission website.

8. Could a legal conflict be caused by your gift? 

Family members may or may not agree with your decision to leave a portion of your fortune to charity. 

A beneficiary may contest your will under the Inheritance Act if they feel it didn't provide sufficient financial provisions for them. They can contend that you weren't of sound mind or that the will was forced upon you. 

Consider carefully if your donation might cause rifts in the family to prevent an unpleasant and costly legal dispute after your passing.