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Charitable legacies: the benefits of philanthropic giving in your will

protect your family from inheritance tax

Although most of us don’t want to think about our death, it is inevitable. When our time does end, something must happen to our financial assets; property, savings, pensions, investments and valuable possessions.

Rather than simply leaving this to someone else to sort out once we’re gone, it is a good idea to plan ahead. This allows you to make sure that your hard-earned money goes where you want it to.

Charitable giving is a fantastic way of ensuring that your money goes to a good cause. There are three ways that you can leave money to charity in your will:

  • Pecuniary legacy- you specify a fixed sum of money that you wish to leave to a charity of your choice.
  • Donate a specific asset- you donate a specific item to charity such as a property, shares or a valuable possession.
  • Residuary legacy- you leave what’s left of your estate, or a share of it, after all costs, legacies, gifts, debts and taxes have been paid out.

Leaving a gift to charity is always greatly appreciated. Some charities have claimed that up to 50% of their funding comes from charitable legacies so it really does make a big difference.

As well as benefiting a good cause, charitable giving can also benefit your loved ones by reducing, and in some cases eliminating, inheritance tax.

Person Holding Black and Grey Pen

How charitable legacies can reduce inheritance tax

Any donation you make to charity will be deducted from your estate before inheritance tax is calculated. This could reduce the tax liability on your estate or even eliminate it completely depending on the total value of your estate and the size of your donation.

You may be able to cut your inheritance tax rate from 40% to 36% if you donate at least 10% of your net estate to charity. This can significantly reduce the amount of tax payable.

What you need to do

If you decide that you want to leave a gift to charity, you should seek professional help from a wills specialist who can make sure your will is drawn up correctly. Your will has to follow certain requirements to be valid. If the details of the charity are not correct then this can prevent them from receiving your donation.

When leaving a gift to charity your will needs to include:

  • The correct spelling of the charity’s name
  • The correct registered charity number and registered address
  • A receipt clause that allows the charity to accept the gift
  • A merger clause in case the charity merges or ceases to exist- this allows the executor to pay the legacy to the new charity or one with similar values

Start donating now

Of course, you don’t have to wait until your death before you donate to charity. Donating whilst you are alive means you may benefit from relief on other taxes such as income tax or corporation tax. A tax specialist can give you more guidance on how this works.

Speak to Rockwood

Rockwood Financial Solutions is a team of independent financial advisers with a focus on providing an excellent personalised service. We can help you calculate your inheritance tax liability and advise you on the options available to reduce your tax bill, including charitable giving.

As well as looking at what will happen after your death, we can also help you plan for your time beforehand. We’ll look at your current financial situation and your plans for retirement, before putting together a personalised financial strategy, making recommendations based on your individual circumstances.

Don’t wait until it is too late. Speak to our friendly team and start planning for yours and your family’s financial future now. Contact Rockwood today to find out more.

At Rockwood we’re passionate about pensions and can help you understand what your options are. Whether you have one or several pensions we can review them for you and explain the advantages and disadvantages of consolidation. If you do decide to switch or consolidate we can help you chose the pension scheme that is right for you. This will be based on your circumstances now and the lifestyle you want to achieve in the future. All of our advice is completely impartial.  If you’d like advice on existing pensions or setting up a new pension then we’d love to help. Contact us today to start making the most out of your pensions now.

Nothing in this blog constitutes financial advice or recommendations, for more information please contact Rockwood Financial Solutions on 0330 332 2679.