The message from the Government from the start of this crisis is that the most charitable measure we can all take is to follow their guidance, protect the NHS and save lives. From the safety of their homes, we have seen many people come up with creative ways to donate to various charities, particularly those benefitting the NHS, giving immediate and much needed aid in the midst of the fight against the coronavirus pandemic.
Almost every area of the charity sector has felt the impact of the pandemic, whether through the cancellation of fundraising events, the closing of high street shops or the broader restrictions that social distancing brings.
Drop in charitable legacies in Wills
Charitable legacies in Wills are the largest contributor to charities' income and recent reports have suggested, that income stream could fall as much as 27% this year as a result of the crisis.
The drop in income is primarily due to the fact that:
- more people are reducing or removing entirely any bequest to a charity in favour of family or friends due to a concern about the negative impact on their finances;
- delays in estate administration due to restricted access to workplaces and reduced staff (see our related article here);
- advice to avoid moving home has slowed the sale of key assets from estates; and
- an unstable stock market making the realisation of stocks and shares challenging and in some cases inadvisable.
Fortunately, these factors are likely only to defer the flow of legacy income to future years and the sector will, in time, see an economic recovery.
How do I leave a legacy to a charity in my Will?
When making your Will, you would direct that a specific sum of money or a particular asset is transferred to your chosen charity or divided among charities. Alternatively, you may direct that a share of the residue of your estate – everything that is left over after debts and expenses including tax and other legacies have been fulfilled – is made over to the charity.
As well as offering your support to charities, charitable legacies attract various tax benefits on death. Any legacy to a charity is exempt from payment of Inheritance Tax. In addition, if you were to leave a minimum of 10% of your estate to a charity or charities, the remainder of your estate that is liable to payment of Inheritance Tax would benefit from a reduced rate of tax. In practical terms, this means that any estate over the nil rate band threshold of £325,000 would be taxed at a rate of 36% rather than 40%.
It is best practice for your chosen charity to be identified in your Will by including their name, registered address and charity registration number. We can write your Will in such a way that provides clear guidance to your Executors however to minimise any confusion over which charity you intended to benefit from your estate.
Although a reduction in legacy income is expected in 2020 and perhaps part of 2021, it is likely that as the country recovers, so too will the bequests to charities. It is hoped that the world we all return to, when some semblance of normal is restored, will be a more charitable world overall.
Get in touch – we're here to help
Harper Macleod's Private Client team help people to make and update their Wills every day.
If you would like to discuss your own situation please contact our private client team using the form below or call one of our offices on:
Elgin: 01343 542623