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27 June 2022 | Comment | Article by Eleanor Evans TEP

Rise in legacies to charity through wills

The charity sector relies heavily on the generosity of benefactors who choose to include legacies to charities in their wills. These may be either gifts of specific sums of money (known as pecuniary legacies), or a share of the residuary estate (the amount that is left over after any debts of the estate, such as the funeral bill and any probate costs, have been paid). 

The ThirdSector publication has recently reported that charitable gifts in wills increased by nearly 11% last year. Their article reflects on data from the charity legacy notification service, Smee & Ford, and states that 37,242 wills (about 15% of all wills left by people who died last year) included a gift to an England and Wales charity.

Charities have been affected by the longstanding delays at the probate registry which have slowed down the administration of deceased persons’ estates, meaning it takes longer for personal representatives to be able to pay legacies left in wills. This has meant a reduction in overall legacy income to charities in the past year, although legacy income is projected by Legacy Foresight to increase by 26% in the next five years, due to the increase in charitable legacies generally. 

 

Benefits of leaving legacies to charity

There are numerous benefits to leaving money to charity in your will. As well as the opportunity to help the charities with their amazing work, gifts to charity can reduce the tax that is payable in your estate.

 

Charities exemption from inheritance tax

Gifts to England and Wales registered charities are exempt from tax, so no inheritance tax will be paid on the value of any gifts you leave to charity in your will.

 

Reduced rate of inheritance tax

If you leave more than 10% of your estate to charity, the rate of inheritance tax your estate will pay is reduced from the usual 40%, to 36%.This can in some circumstances mean an additional tax saving for the beneficiaries of your estate who are not charities. 

 

Charities exemption from capital gains tax

Charities also are not liable for capital gains tax. This means that, if any gains are made on assets within an estate (such as an increase in value of a property), personal representatives can appropriate the assets to the charities and sell them on the charities’ behalf, meaning no capital gains tax will arise.

 

For more information, please contact our Private Wealth team.
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Author bio

Eleanor is Head of the Trusts and Estates Administration Department, a large team dealing with estates and trusts administration on behalf of financial institution and trust corporation clients. Eleanor is a specialist in wills, probate, tax and trusts, and is a full member of STEP (the Society of Trusts and Estates Practitioners). She is also a committee member of the STEP Wales branch.

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Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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