Leaving gifts to charity in your will

UK charities rely heavily on gifts left to them in someone’s will – this amounts to 13% of all charitable donations and can amount to £2billion a year. It shows why charities in the Dorset area, amongst others are becoming ever more competitive, proactive and active.

Disappointed relatives may take the view that the charity should surrender all or part of their gift, but charity trustees are not permitted to surrender their interest. The only time that this may happen is in settlement during litigation or court processes, or under the principles of ex gratia payments, which is covered by section 26 of the 1933 Charities Act.

Gifts made to UK charities during both lifetime and under a donor’s will are exempt from Inheritance Tax, although gifts to foreign charities are not exempt. It is possible to leave a fixed sum (called a Pecuniary Legacy) or part, or all, of your estate, once other gifts have been distributed (known as Residuary Legacy).

Heather Varley, Associate in our Wills & Tax Team says “Wills must be carefully drafted to avoid inheritance tax complications arising where estates are made up of gifts to charity which are exempt and non-exempt gifts, for example other beneficiaries such as relatives. To avoid these complications, it is essential that the intention of the wording in the will is quite clear. Charities can be quite stringent in ensuring that their exempt share is maximised.”

Lifetime gifts to charity present a significant tax advantage. Under Gift Aid provisions, an individual is entitled to income tax relief when making charitable gifts. Donations are made net of basic rate tax and the income tax deducted is claimed from HMRC by the charity.

If you would like advice on this area please don’t hesitate to get in touch with Heather or a member of her team. Our Wills & Tax Team, based in Christchurch, also cover Bournemouth, Poole and the New Forest. For a free initial chat, please call 01202 499255 and a member of the team will be happy to discuss any questions that you may have.