Charitable bequests are gifts left to a registered charity in your Last Will and Testament. It forms part of your estate plan and takes effect after your death.
This gift can include:
- Money
- Property
- Shares
- Possessions
- Part of your estate
People also refer to charitable bequests as a “legacy gifts”. Although the terms differ, the principle remains the same. You choose to support a charity through your Will.
Types of Charitable Bequests
Pecuniary Gifts
A pecuniary gift is a fixed sum of money left to a charity. For instance, you may leave £5,000 to a medical research organisation. This option is simple and easy to include in your Will. However, inflation may reduce its value over time.
Residuary Gifts
A residuary gift gives a percentage or share of your estate. It applies after settling any debts, taxes, expenses and other gifts. This option also adjusts with the value of your estate. For instance, you may leave 10% of your estate to charity. Your family and other beneficiaries then receive the remaining share.
Specific Gifts
A specific gift involves leaving a particular item to charity. This may include:
- Property
- Shares
- Artwork
- Jewellery
- Vehicles
- Personal possessions
For instance, you my leave a piece of land to a charity. The charity can then use it or sell it to raise funds. However, you should check whether the charity can accept the item.
Reversionary Gifts
A reversionary gift allows a loved one to benefit first. After their lifetime, the asset passes to a charity. For instance, you may allow a spouse to live in a property for life. After the pass away, the property may then pass to a charity.
Contingent Gifts
A contingent gift only applies if certain conditions occur. For instance, a charity may receive assets if other beneficiaries die before you. This type of gift provides a fallback option. It ensures your estate still supports a cause if your primary wishes cannot take effect.
Reducing Inheritance Tax with Charitable Bequests
Charitable bequests can reduce Inheritance Tax in two ways.
1. Gifts to Charity
Gifts to registered charities are free from Inheritance Tax and do not count towards the taxable estate. These gifts reduce the total value of your taxable estate, which can bring it closer to or below the tax-free threshold.
2. Leaving a Percentage of Your Estate
Inheritance Tax usually applies at 40% on the taxable part of an estate. However, if you leave at least 10% of your estate to charity, the tax rate falls to 36%. This lower rate then applies to the remaining taxable estate.
However, the 10% rule can involved detailed calculations. Executors may need to consider different parts of the estate. This can include free estate assets, jointed-owned assets and trust property.
Why People Leave Gifts to Charity
People leave charitable bequests for many personal reasons. Some have supported a charity for years. Others may have received help from a charity during their lifetime.
For instance, you can leave charitable bequests to:
- Support causes you care about
- Help charities continue their work
- Leave a lasting personal legacy
- Honour a loved one’s memory
- Make a positive impact after death
- Reduce Inheritance Tax liabilities
These gifts can make a real difference. For many charities, legacy income supports long-term services and future projects. As a result, even a modest gift can have a lasting impact.
Simply put, a charitable bequest allows your values to continue beyond your lifetime.
Balancing Family and Charitable Giving
Many people want to support charity while still providing for loved ones. Fortunately, you can achieve both with careful planning.
You may consider:
- Leaving a fixed sum to charity while prioritising family inheritance
- Donating a percentage of your estate to share value proportionally
- Using a reversionary gift to protect a loved one first
- Adding a contingent gift if family beneficiaries cannot inherit
- Reviewing gifts when your finances or family situation changes
A balanced approach reflects both personal and financial priorities. It also reduces the risk of disputes after death. Moreover, you should consider those dependant on you. Under UK law, certain individuals may challenge an estate if they lack reasonable financial provision.
How to Include a Charity in Your Will
When including a charity in your Will:
- Use the charity’s full registered name
- Include the charity registration number
- Add the charity’s registered address
- State the type and value of the gift clearly
- Explain any specific purpose for the gift (if needed)
- Consider adding a backup charity
- Include wording for charity mergers or name changes
You may also wish to specify how the charity should use your gift. For instance, you may want it to support research or education.
When the Charity Changes or Closes
A charity may change its name, merge or close before the distribution of your estate. A well-drafted Will can address this risk. It may allow your executors to redirect the gift to a similar charity. It may also include a merger clause.
Charitable Bequests and Probate
Probate is the process of managing an estate after death. Executors collect assets, settle debts, deal with tax and distribute gifts.
If your Will includes a charitable bequest, executors must contact the charity. They must confirm the gift and arrange payment or transfer.
If your gift includes conditions, executors must also ensure these conditions are met.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK laws and regulations are subject to change. Please speak to a professional for advice tailored to your individual circumstances. Will Guardian accepts no responsibility for any issues arising from reliance on the information provided.