There are more than 185,000 registered charities in the UK and the number is growing by 5,000 per year.  Those charities vary from medical research, hospitals, children’s welfare, animal welfare, military veterans, air ambulance, universities, disaster assistance, local community funding and many, many more; the list is almost endless.  They are all in need and legacy-giving is an area of fundraising on which the charity sector is hugely reliant.

Whilst 35 percent of people say they would leave a legacy to charity in their Will, only seven per cent actually do so. 

37% of people have made a Will and, of those, 24% have mentioned a charity in it. Of those who have made a Will, it’s the younger age groups who are more likely to have left a gift to charity in their Will; 50% of 16- to 24-year olds compared to 21% of 65+ year olds. This statistic is also mirrored amongst those who have not yet made a Will. Of this group, 50% of 16- to 24-year olds said they would consider leaving a gift to charity, compared to just 17% of those aged 65+. 61% of this age group said they would not leave a legacy to charity in their Will.

The charities who receive the most in legacies on an annual basis are (1) Cancer Research UK (2) Royal National Lifeboat Institution (RNLI) and (3) Royal Society for the Prevention of Cruelty to Animals (RSPCA).

It has often been reported that charities have made themselves unpopular by their persistent and often unwelcome badgering of their donors during their lifetime which then deters those donors from leaving legacies in their Wills.  It has also been widely reported that the charities’ solicitors have been known to hound the executors and trustees of Wills rapaciously to extract as much as possible as quickly as possible for the charity coffers.  This can be very intimidating for the average lay executor.

That being said, many of my clients still wish to give to charities that are dear to them and my advice, when appropriate for an individual client, would be to use a Charitable Trust within their Wills. A Charitable Trust escapes the prying eyes of the charity solicitors who scour the probate registries checking to see who has left a legacy to them and then harassing the executors for that legacy.  A Charitable Trust is a simple mechanism where the total amount the testator wishes to donate to charity is detailed in the Will but the Will just states that it is in a Charitable Trust, not mentioning which charities are to benefit.  The monies are put into a trustee bank account in accordance with the Will trust.  The executors then distribute to the charities concerned when they are ready, unfettered by the charity solicitors.

But, how do the executors know which charities to gift to?  Well, accompanying the Will is a Letter of Wishes explaining the testator’s wishes.  This Letter of Wishes can be changed any time the testator desires before death.  Simple but effective.

An alternative to using a Charitable Trust is to use the Charities Aid Foundation (CAF) (https://www.cafonline.org/).  It is a charity that will manage your donation to gift to whichever charities you wish and you are able to dictate how that happens.  For a small fee to CAF, this will take that burden away from your trustees.

Another under-used benefit of charitable giving is for Inheritance Tax Planning.  For some wealthy clients who in turn have wealthy families, giving their wealth to their family is both unnecessary and not tax efficient.  In these cases, they will leave a gift up to their available nil rate band to their family and friends, tax-free, and the balance of their estate is gifted to charity.  Hence the whole estate passes tax-free at their death.  Please note that calculating their available nil rate band can be a complex computation involving unused nil rate bands and potentially the available residence nil rate band.  This can be accomplished using the appropriate wording within the Will but please ensure you use expert advice for this.

A further method of utilising charitable giving to reduce your inheritance tax bill is to gift 10% or more of your estate to charity in your Will.  If you satisfy this requirement you will get a tax relief, reducing the inheritance tax you pay on your estate at your death from 40% to 36%.  Therefore, sometimes, by gifting to charity, your family will receive more!!

Too often when I am sat with clients, we focus on the ‘hard facts’ in estate planning – how much their estate is worth, who owns what and of course tax- and cost-efficient ways of passing wealth to the future generations.  These are all vital parts of the process but it doesn’t end there.  We need to dig deeper into what I call the ‘soft facts’ to make sure we end up with what the client really wants to achieve.

Families are complex beasts with complex issues.  How is it going to impact a beneficiary when they receive what could be a large sum of money?  The industrialist and philanthropist, Andrew Carnegie, said “Why should men leave great fortunes to their children?  If it is from affection, then it is misguided affection because great sums bequeathed often work more for the injury than the good of the recipients.”  Admittedly that was said at the beginning of the 20th century and most of us haven’t got huge fortunes to leave.  But the sentiment is there.

A more recent example is that together Warren Buffett and Bill Gates have established the Buffett-Gates Giving Pledge which has resulted in many billionaires pledging most of their wealth to charity. In wanting the best for our children, maybe because we did not have that privilege ourselves, could we affect our children’s self-reliance, ambition and ultimately their self-esteem or hunger to work?  The values we pass on to our children, and the education and life experiences we encourage them to have, including learning how to become financially savvy and astute, are all part of life’s challenge.

What if beneficiaries have dependencies that could be catastrophic for them if they inherited large, or even small, sums of money?  I’m talking about alcohol, drugs or gambling addictions or indeed other socially-debilitating issues.

What if the client doesn’t really like or trust their daughter-in-law?  What if their son-in-law has money problems or his business is a little shaky?

Detailed meetings to really delve into the details are the only way to get to the bottom of it all.  Sometimes those can be ‘family’ meetings.  It is important to establish the values of that family and sometimes it is important to involve the next generation to ensure everyone is aware of the family expectations as well as preparing our children and other family members to handle and manage their inheritance.  This can be particularly pertinent with regard to family businesses and farms.

As you can imagine, the ‘softer issues’ are often harder to resolve than their ‘harder’ counterparts.  Proper estate planning, where the estate planner is prepared, experienced and qualified in teasing out that information from their clients, is key.  Make sure you feel comfortable with the estate planner you have chosen as, if they are doing their job correctly, you should be sharing information with them that is relevant but probably quite personal.