Do people leave gifts to charity in their Wills?
In our experience, the number of clients who leave gifts to charity in their Wills is not reflective of their charitable donations during their lifetime. Most clients would donate to charity (either regularly or from time to time) during their lifetime, but only a small proportion would leave gifts to charity in their Wills (around 10%).
Clients who do leave gifts to charity in their Wills, would typically be people without immediate family, or those who have a personal connection or experience with a charity because that charity has had a personal impact on their lives (e.g. through illness, support, or personal, religious or educational affiliation).
It is more common to leave gifts to charity as a ‘backup’ or ‘calamity clause’ if other beneficiaries are not alive to receive their gifts, but most of the time this ends up being a token gesture as it is more likely than not that their primary beneficiaries will be alive and entitled to receive their gifts.
What to consider when leaving gifts to charity
One thing to consider is whether you want to leave:
- A specific gift such as a cash amount or a particular asset or property, or
- A percentage of your residual estate, being the balance of your estate left over after all costs and liabilities are paid, and specific gifts are made.
A specific gift provides certainty, but if your estate is worth less than you expect at the time of your death, this could mean that your residual beneficiaries end up with less than you anticipated. A percentage on the other hand, will mean that the charity will only ever receive a proportion relevant to the other beneficiaries. This could end up being significantly more or less than what you envisaged.
Other things to consider are:
- How you name and describe the charity and refer to its ABN so that it is easily identifiable, especially when there are different entities or branches forming part of the broader organisation or the charity may change names.
- Whether you want your gift to be applied to a specific purpose of the charity (e.g. for an educational scholarship) or whether you are content to have the charity apply the gift for their general purposes. Most charities would prefer the flexibility to deal with the gift as they see fit.
- What might happen if the charity is no longer in existence or has amalgamated or changed names. Will the gift be payable to successor charities? Do you want your executor to select a charity with similar purposes or objects? Make sure your Will is drafted to cover any future changes to the charity’s structure.
- The most tax effective way of leaving the gift to the charity. For example, where a charity is a deductible gift recipient (DGR), gifts of certain assets will disregard Capital Gains Tax (CGT) consequences, but on the flipside, gifts to DGRs under your Will will not be fully tax deductible even though they would have been during your lifetime.
The proposed gift to charity should always be considered in the context of the overall will and the interests of other beneficiaries.
- The size and nature of your estate from which the gift is to be made. Your assets may be owned in entities such as trusts or companies that will not form part of your estate governed by your Will. If most of your assets are owned in other non-estate structures, there may not be enough in your estate to fund the charitable gift.
- Setting up ongoing gifts to charities in accordance with your regular pattern of giving, to ensure that you can continue to support charities that are close to your heart if you lose decision making capacity, but you are still alive. This can be achieved using an Enduring Power of Attorney document, and is something you can chat to your attorney about.
What should you do before you leave money to charity?
- Get specialist legal and tax advice and have the will professionally drafted as part of an overall estate plan. We can help with this at Aintree Group Chartered Accountants and Aintree Group Legal.
- Contact the charity to find out the correct entity details and their recommendations for leaving gifts under Wills. Most charities will have information on their website about the best way to do this, and even suggested clauses to include.
- Consider the value of your overall estate and weigh up the competing interests of all the beneficiaries.
What are the risks associated with doing this?
The risks can include:
- If you leave money to charity, your wealth may not be distributed in the way you intended, because the gift ends up being more or less than you expected (see above regarding monetary gift versus percentage of estate).
- There can be adverse tax consequences due to the type of gift, or it might not be a tax effective gift when there is an opportunity to do so.
- The charity is misdescribed in your will (e.g. the name and ABN do not match), creating uncertainty and ambiguity. This can lead to the gift failing.
- The funds are not applied in the way you intended.
Should I actually consider this for my Will?
Of course! If there is a cause close to your heart, then supporting that charity upon your death can be a very good idea.
It can be difficult for some charities who rely heavily on funds from specific benefactors. When those key benefactors pass away, then that reliable source of funding stops. Making appropriate provisions for a charity in your Will is a way you can continue to support that charity after your death. The charity receives one final donation to ease the financial impact of losing a regular benefactor.
If you would like to leave a gift to your chosen charity in your Will, don’t hesitate to contact us at Aintree Group Legal. We can help with the whole process and help you fulfil your final wishes.