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Legacies

Charity & Not-for-Profit

During your lifetime you may wish to specify that a particular item, cash value, property or residual estate can be left to charity to be actioned upon your death. Often made through Wills and Trusts, donations left to charitable causes should be carefully considered.

When including a charitable gift in your Will it is essential to include accurate and relevant information in relation to the charity including the charity’s name, the registered charity number and a clause to deal with what happens if the charity ceases to exist or merges with another organisation.

Legacy disputes may arise should a family member or beneficiary not feel that they are getting what they are entitled to, or contesting the validity of a Will.

Gifts

There are a number of different ways in which a charitable gift can be left in a Will:

  • A pecuniary legacy – you can leave a fixed sum of money for example £5000
  • A specific legacy – you can stipulate that a specific item such as an item of jewellery is gifted
  • A residual legacy - you can give a portion or the entirety of your residuary estate to charity. This means that the charity will receive the funds that are left in your estate (or a portion of the funds that are left in your estate) after any specific gifts, debts, funeral expenses and inheritance tax are paid.
Legacy Arrangements

Inheritance Tax may be payable on an estate (including property, money and personal belongings) when someone dies if the value is over the taxable threshold(s). If the estate value is above the taxable threshold(s) Inheritance Tax is charged at 40%. There are a number of exceptions to this; for example, if you leave everything (or everything above the threshold) to your spouse or civil partner, there will normally not be any Inheritance Tax to pay.

Leaving charitable gifts in your Will can eliminate or reduce the Inheritance Tax payable in your estate. If you make a charitable gift (or various charitable gifts) in your Will, there is tax relief; those charitable gifts are Inheritance Tax free.

Further, if 10% or more than 10% of your estate is left to charity, the rate of Inheritance Tax applicable to your entire estate can be reduced from 40% to 36%. In many estates, this reduction can result in a considerably smaller Inheritance Tax bill upon death.

Legacy Challenges

Challenges to Wills containing legacies to charities are increasing substantially.

It will often be the case that where the legacy to the charity is for the residue or a substantial proportion of the estate that the charity will be invited by the Executors to address the challenge and/or negotiate as it sees fit.

Sometimes challenges are valid but frequently they lack merit. It is essential that charities consider taking advice at the earliest possible stage before deciding what approach to take in relation to such a challenge

If the charity has not been invited to take over the negotiation of the claim, they need also to take advice so that they can be satisfied that the steps taken and any negotiations proposed are appropriate and in their best interests.

For further advice, please contact Lesley Rushton, Charlotte Nock or a member of our Charities and Not-for-Profit team based in Canterbury, Ashford and Herne Bay.

Our Experts

Caroline Armitage

Consultant Solicitor
Corporate, Banking & Finance, Commercial Law and Charities & Not for Profit

Lesley Rushton

Head of Department
Wills, Tax & Estate Administration and Court of Protection

Charlotte Nock

Partner
Wills, Tax & Estate Administration

Andrew Watson

Partner
Dispute Resolution, Contested Wills & Estates

Jeremy Burke

Head of Department
Commercial Property

David Morgan

Senior Associate Solicitor
Employment law

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