Probate and gifts to charity: What you need to know
Leaving gifts to charity in wills is a great way to remember causes important to you and your family. It allows you to support charities in their work while reducing any potential inheritance tax bill after you die. This ensures there’s more for your loved ones to share.
As an executor dealing with probate, you might be surprised that gifts to charity often pose unexpected challenges. The process can be less straightforward than anticipated.
To help you through any confusion, we have set out some of the key points you need to consider. Hopefully, this will leave you feeling more prepared to deal with gifts to charity in a will.
What are the main types of gifts to charity in a will?
Gifts in wills to charities are sometimes referred to as donations or legacies. As with other gifts in a will, this could be one of the following:
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Pecuniary legacy
This is where a set sum of money has been left to charity. It might be left to one charity, or to more than one to be divided between them.
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Specific legacy
This is a gift of a particular asset, be it a house, or a shareholding. The will may state whether the charity is to receive the gift as it is. Alternatively, the asset may need to be sold first, and the sale proceeds passed on to the charity.
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Residuary legacy
A gift of all or part of remaining monies and assets after all estate payments have been made. This includes all other gifts in wills, debts, expenses and inheritance tax. We will cover inheritance tax in more detail later on.
Check the will for any wishes relating to the gift to charity
Sometimes, a will may state that the trustees can decide which charity they want to make the gifts to. Trustees are the people holding the money and assets gifted above, usually the same people as the executors. Where this happens, you may find a letter of wishes or other record of your loved one’s wishes. This can help you to make a decision as to which charity to benefit.
You should also check whether there are any restrictions on the charity using the gift. For example, the gift may have been left to a particular branch of a charity. Your loved one may have also asked that the gift be used for a specific purpose. If the will or any letter includes wishes such as these, you should discuss this with the charity. The charity will help you ensure that your loved one’s wishes are carried out.
Make sure the charity details are correct
It is important to make sure that you pay any gift to the right charity. You should check the charity name by searching the register of charities on the Charity Commission website. You may find that there are several results with similar names. If you search any registered charity number on the Charity Commission website, this should only give you the name of the charity you are searching for.
If you cannot find the charity you are searching for, or if you believe that it has closed down, you should seek legal advice. A lawyer will be able to advise on whether you can still make the gift to a similar charity, if the gift will pass to anyone else in the will, or if the gift will fail completely.
Gifts in wills left to local clubs and organisations may still count as a charity for inheritance tax purposes. If you are unsure, again it is important that you seek legal advice.
Do gifts to charity affect the amount of inheritance tax paid by the estate?
In short, yes. Inheritance tax is usually charged at 40% on estates over £325,000. Of course, there are exemptions to this general rule. Our guide to inheritance tax can be found here.
That being said, any gifts in the will to charity will be exempt from inheritance tax. There is also another advantage to leaving a gift to charity: If more than 10% of the estate has been left to one or more charities, then the inheritance tax which is paid on the remaining estate is reduced from 40% to 36%.
Note: This is a complicated area of law, and you should seek professional legal advice to make sure that you carry out calculations correctly.
A family member or dependant is disputing the gift left to charity. What should I do?
Your loved one may well have had the best of intentions when deciding to leave a gift to charity in their will. Sometimes, a gift may not leave adequate provision for family members or dependents. Depending on the size and nature of the gift, sometimes claims are made alleging that a person was not of sound mind when they made their will, or that someone was putting them under pressure to leave their assets in a certain way.
While your loved one may have made legacy donations with good intentions, disputes can arise. Family members may contest a Will, claiming inadequate provision for financial dependents or asserting that the donor was under undue influence or not of sound mind. You must prepare yourself for potential disputes and seek legal advice when you need it.
If you are dealing with claims or disagreements from a family member or dependent, you should seek legal advice. With a professional, you can discuss the possibility of defending such a claim. You may also consider varying the will to benefit the disappointed person in question.
The below guides will help you to understand your options better. You will also be able to contact the right professional to advise you on gifts to charity.
Other Useful Guides
Deed of Variation: Changing a will after death
What is Probate and do I need it?