Leaving Money to Charity in Your Will

You are free to nominate any beneficiary in your Will, including charities, as long as you make adequate provisions for your dependents as well. Donating a portion of your estate to a charity leaves a lasting legacy, helps to provide funding for a good cause that is close to your heart, and can also reduce the amount of inheritance tax payable.

How to Leave Money to Charity?

If you wish to nominate a charity as a beneficiary in your Will, you can either name a specific charity or charities, or leave it up to the Trustees to decide on your behalf. Should you decide on the latter, you need to ensure that your wishes are clearly laid out in your Will to avoid confusion. It is also important to understand the different types of legacies to include in your Will, and you need to decide whether the donation will be a cash gift or an asset.

Pecuniary

This is the most straight forward legacy, and the most popular. Essentially you just stipulate a certain cash amount to a specific charity, and the Executor will ensure that money goes towards the cause.

Specific

You can also leave a particular item. Property and individual shares are common options.

Residuary

Once all the debts and taxes have been settled and the beneficiaries cared for, you can choose to leave whatever remains of your Estate to whichever charities you choose.

You can specify how the charity should apply your donation, but it is advisable to discuss this with them in advance to ensure that they are able to agree and comply.

Can Charitable Donations Be Contested in a Will?

As mentioned, you need to make reasonable provision for your financial dependents, as per the Inheritance Act. If there is doubt that your Will was fair, a disgruntled beneficiary could challenge the Will. If they claim undue influence, or that you were not of sound mind when nominating the charity, your entire Will could be declared invalid.

How Does A Donation Affect Inheritance Tax?

In the UK, donations made are inheritance tax-free, as long as they are made to UK-based charities. When your spouse is your sole beneficiary, the Estate is tax-free, but everyone else is subject to the inheritance tax threshold of £325,000. Everything over and above that will be taxed at 40%.

Aside from the gift itself being tax-free, it also reduces the amount of inheritance tax on your Estate. Should you donate, say, 10% of your estate to charity, the tax rate on the Estate drops from 40% to 36%. This means that if you increase your donation to a minimum of 10%, both the charity and your beneficiaries receive more money in the pocket.