31 August 2022

Leaving money to charity in your will

By John Newham, Solicitor, Hayes + Storr.

There are many reasons why someone might choose to leave money to charity in their will. It could be due to a lack of close family members; or some may simply wish to create a longer lasting personal legacy, or might have strong feelings about a certain cause. Perhaps it might be part of a tax planning exercise to legally reduce the amount of Inheritance Tax which might otherwise become payable.

Cromer Hospital

The new Cromer hospital which opened in 2012 was funded by legacies from Sagel Bernstein (self portrait – pictured), whose sister was cared for by the hospital, and former patient Phyllis Cox, who was so impressed with the care she received when she had a stone removed from her salivary gland in the 1950s, made arrangements for the hospital to receive her £1.4m estate. Her husband had passed away before her and they did not have any children.

Sagle Bernstein lived at the Richmond Court Gardens in Cromer with her sister Muriel Thoms, and left £11.4m as a thank you for the care Mrs Thoms received at the hospital before she died in 1998.

Charitable gifts are a great option for those without close family

If you no longer have any close family or friends, you might not want your money to end up with distant relatives you never speak to or see. If you find yourself in this situation, a gift to charity could have more meaning to you.

Making a will in which you clearly set out your wishes is the only way to ensure that any charities can benefit from your estate. If you die without a will then the predetermined intestacy rules apply, and these never provide for money to pass to charity. Even if you leave no distant relatives, intestacy will mean all of your assets end up being left to the Crown. Most prefer for their money to pass to a good cause of their choosing.

Creating a lasting personal legacy with charitable gifts

In Sagle Bernstein’s case, her sizeable donation was made to Cromer Hospital for the general benefit of Cromer and its residents. Not only will the donation benefit those in the area, but the sisters are remembered at the hospital with the minor injuries unit (MIU) being named after Mrs Bernstein and the day procedure unit after Mrs Thoms. Paintings by Mrs Bernstein are also hung in the new building. The Audiology Unit on the first floor has been named after Phyllis Cox.

Whilst not everyone who leaves money to charity ends up with a permanent memorial, charities are grateful for any sums they receive and your legacy will live on in the meaningful work they are able to provide as a result of your gift, whatever size it may be.

The effect of charitable giving on inheritance tax

For many, tax saving is not the key consideration for leaving sums to charity, but it is usually a welcome side effect.

Any gifts you leave to charity in your will pass free of inheritance tax, as charities count as exempt beneficiaries. This reduces the value of your estate by the amount of the gift before any tax-free allowances are taken into account, leaving a smaller pot to fall subject to inheritance tax.

In addition, if you leave 10 per cent or more of your estate to charity the remainder benefits from a reduced inheritance tax rate, meaning a greater share for your other beneficiaries. Inheritance tax calculations and tax-planning is complex, and it is advisable to seek advice before finalising decisions on the basis of tax.

How can we help?

If you wish for some, or all, of your assets to pass to a charity close to your heart, the only way of ensuring this happens is to include clear instructions in your will. Making a will allows you to control how your estate passes when you die, including specifying charitable gifts, whilst making sure everything passes in the most tax efficient way.

Our solicitors can advise you on preparing a will in a way that ensures your choices are clear and legally binding, as well as helping you to create the legacy you wish to leave.

For further information, please contact John Newham on 01328 863231 or email john.newham@hayes-storr.com.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.