The best way to support your favourite charity

Have you decided to leave money to charity in your will? Many people do. But this can give rise to difficulties:

  • Every time things change, you need to change your will
  • Once charities get wind of it, they can be a nightmare, hassling executors for their share
  • If charities see something of value in your estate, such as property, and don’t agree, they can challenge it (sometimes quite aggressively)

What’s the answer?

We encourage you to have a will. For longevity, we suggest that you keep it as simple as possible and don’t include too many things in it.

So, instead of naming individual charities, you could leave an amount (or a percentage of your estate) to the CAF Charitable Legacy Service with a letter of wishes that explains how you’d like it to be distributed.

CAF charge an admin fee for this service, but we think the extra flexibility is worth it.

Benefits

  • CAF provides the wording, so drafting the will is simplified (and therefore your solicitor’s fee could be lower)
  • Having fewer beneficiaries to deal with makes life easier for your executors
  • You can change your mind whenever you like and update the letter of wishes without having to redo your whole will
  • The letter of wishes is not a public document, so charities don’t get to see it
  • You don’t have to name specific charities; you can give a general instruction about which causes you want to support and CAF will do the rest
  • Your donations can be anonymous
  • CAF is a registered charity, meaning that the charitable exemption will still apply

Tax

There’s also a potential inheritance tax benefit.

All gifts to charities are free of inheritance tax (IHT) if they are made to a UK-based charity AND the gift is outright (without any conditions or limitations) AND immediate (with no one else having an interest between the giver and the charity).

If you leave 10% of your net estate to charity, IHT reduces from 40% to 36%. This means your beneficiaries pay 4% less tax – but they will have ‘lost’ the 10% of your estate to charity. This is probably more effective for larger estates, but only you can decide whether it’s worth it. Note that you’ll need to include a special clause in your will to ensure the amount the charity/ies get totals 10%.

Trusts

You could set up a specific Trust to benefit your favourite charities or charitable purposes. This would benefit them in the long-term rather than just making a one-off lump sum to them on death.

For more information, please get in touch. As always, we’ll be happy to help.

P.S. This links to our article about estate planning: What’s your digital legacy?

Name: Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100