Imagine there was a way you could continue making a positive impact on the world long after you’re gone. This is exactly what charitable bequests in your will potentially allow you to do, a trend that has grown by 7% over the past year, Today’s Wills and Probate reports.
By choosing to support a cause that’s close to your heart, you can ensure that your values live on after you’ve passed away. This might be financially advantageous for your loved ones in certain circumstances, too.
With World Kindness Day having recently passed on 13 November, now might be the ideal time to consider how your legacy could bring lasting kindness to the world.
Continue reading to discover three practical and heartwarming benefits of leaving a charitable legacy in your will.
1. You could support a cause close to your heart
The true power of leaving money to charity in your will lies in the ability to create a lasting positive change.
Choosing a charity might initially feel daunting, as there are countless organisations working tirelessly on a wide range of issues, from healthcare to animal welfare. So, you might want to start by considering causes that mean something to you.
The Charities Aid Foundation found that 32% of people select a charity based on their personal experiences.
If you’ve personally had a good experience with a charity in the past, you might want to support one that champions similar issues.
Alternatively, if you’ve experienced the effects of a particular illness, contributing to medical research or patient support services could help others facing similar challenges.
Many charities, such as Guide Dogs for the Blind, depend heavily on donations left in wills, with nearly two-thirds of their dogs funded this way. Your generosity could enable these organisations to continue their essential work helping those in need.
No matter the size of your contribution, a little can still go a long way. Unfortunately, many organisations miss out on potential funding because people forget to include bequests in their wills or overlook the opportunity altogether.
According to Today’s Wills and Probate, this results in millions of pounds lost to charities that could otherwise make a significant difference.
So, next time you’re writing or reviewing your will, this could be the ideal time to leave some of your wealth to a charity and make a real difference, as the emotional effects of doing so are considerable.
Knowing that your charitable gift will help others could offer a much-needed sense of purpose and fulfilment, as you’ll be making a difference in someone’s life even after you’re gone.
2. You might reduce the rate of Inheritance Tax your loved ones pay
A charitable gift in your will doesn’t just benefit the cause you support – it can also offer some financial relief to your loved ones in the form of a reduced rate of Inheritance Tax (IHT).
Indeed, if you leave at least 10% of your estate to qualifying charities in your will, the rate of IHT your beneficiaries pay could drop from 40% to 36%. This could significantly reduce the bill your loved ones face during a time that is already emotionally challenging for them.
To benefit from this reduction, you must leave your bequest to a qualifying organisation, which includes:
- UK-registered charities
- Community amateur sports clubs
- Political parties.
By deciding to leave money to a charity, you not only support a cause close to your heart, but also potentially help to ease the financial burden on your loved ones.
Just remember that IHT rules can be somewhat complex, so make sure to get in touch with a financial planner if you have any questions regarding tax rates and charitable legacies.
3. It can reduce the overall value of your estate
As well as reducing the IHT rate, you may be able to further limit a tax bill by reducing the size of your taxable estate.
In 2024/25, the nil-rate band – the threshold below which no IHT is typically due – remains up to £325,000.
Additionally, the residence nil-rate band, which applies if you leave your main home to a direct lineal descendant, stands at up to £175,000. If you’re part of a couple, you can also transfer any unused allowances to your spouse or civil partner, enabling you to potentially leave up to £1 million to your beneficiaries before IHT is due.
While these thresholds might seem substantial, you could be closer to paying IHT than you initially anticipated, especially when you factor in the cost of your home and other assets.
One effective way to reduce the overall value of your estate is through charitable donations, as these gifts are typically excluded from your estate before IHT is calculated.
Reducing your estate’s overall value through a charitable gift could help your loved ones avoid an unexpected or particularly large tax bill.
This ability to help a charity while reducing the tax your family might have to pay can provide you with incredible peace of mind, knowing that your finances are suitably organised for everyone involved.
Get in touch
We could help you create a charitable legacy that both supports a cause close to your heart, all while potentially reducing the tax burden on your loved ones.
To find out more, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.
