According to a recent study by The Goodwill Partnership, leading UK charities are missing out on billions of pounds each year because people are not making a Will and are not leaving any money to charity when they die.
At present 32.5 million adults in the UK don’t have a Will, but it’s calculated that if only one per cent of those individuals wrote a Will and left a legacy in that Will, charities would stand to receive around £17 billion.
It’s also estimated that charities could be missing out on billions of pounds from those individuals who have made a Will, as only a small percentage include a legacy in their Will because they don’t know how to leave money to charity in a Will.
Plus many people are unaware of the tax advantages of leaving money to charity. All gifts to charity made in a Will are exempt from Inheritance Tax.
Andy Chesterman, Head of Planning at The Goodwill Partnership, says: “It’s hard to believe but the average legacy donation is £54,000. That’s a substantial amount of money for any charity yet many people don’t leave legacies simply because they do not know how to.”
But what exactly is a ‘legacy’?
A legacy is a legal term simply meaning a gift made under a Will. A legacy comes into effect only after a person has died. There are three types of legacy:
- Pecuniary - a sum of money
- Specific - property, shares, jewellery, works of art or other items
- Residual - the balance of your estate (money, investments and possessions) in whole or part after satisfying other legacies and expenses
But in the case of leaving gifts to charity, a “legacy” usually refers to a specific amount of money.
How do you leave a legacy correctly in a Will?
According to Lawpack's DIY Last Will & Testament Kit, when making a gift of money to charity in your Will you should be careful to identify an existing charitable organisation. Don’t name the general purpose or use a loose description of the charity, as in these cases the gift may fail or cause complexity for your executor(s). For example, rather than leaving £500 to ‘cancer treatment’ leave it to ‘Cancer Research UK’.
When making any gift of money to charity, you should always state clearly the amount and the charity that is to receive it:
Example: ‘I give the sum of £1,000 to Macmillan Cancer Relief Fund.’
How do I leave specific gifts in a Will?
If you’re leaving a specific gift in your Will, then always indicate clearly who is to receive each item of property and identify each item of property clearly.
If you’re leaving your grandfather’s WW1 war medal to the Imperial War Museum, for example, then you should write in your Will:
Example: ‘I give the Victoria Cross, owned previously by my grandfather James Ross, to the Imperial War Museum, Lambeth Road, London, SE 1 6HZ.’
What about leaving shares?
Try to avoid making gifts of property that are transitory in nature or those gifts which may have been sold or changed form before your death. Particular difficulties can arise with gifts of shares or bank accounts, for example.
How about leaving my property?
Sometimes a particular item of property that you want to leave in your Will is charged with payment of a debt or other liability; for example, a house which is subject to a mortgage in favour of the bank. The widest term for these charges, in legal terms, is ‘encumbrances’.
So if you’re leaving your house to a charity in your Will, you should clearly indicate whether the charity that receives the property takes it subject to the encumbrance, or free from the encumbrance, in which case the encumbrance will be paid out of the residue of the estate.
What is the ‘residuary estate’?
The residue is what is left of your estate after the deduction of specific gifts, debts, legacies, tax and the expenses of administration.
If you decide not to make any specific gifts, but instead want to give all of your property to one beneficiary alone (e.g. a charity) in your Will, then this gift becomes the ‘residuary gift’ and the charity will receive whatever is left after the necessary deductions have been made.
You must make a residuary gift in your Will, otherwise you will die partially intestate. This means that any specific gifts and legacies can be distributed according to your wishes, but the remainder of your property, which makes up the residue, will be distributed under the rules of intestacy. This could result in a distribution you may not have wanted.
Your residuary gift can be given to any number of beneficiaries, but if it’s given to more than one, you must state the share of the residue that each beneficiary is to receive, whether equal or otherwise.
Get more expert advice on the terms you should use in a Will with Lawpack's Last Will & Testament Kit.
Why should I bother making a Will?
Most people believe that their family will receive all their possessions, whether they write a Will or not. But this isn’t always the case.
When you die without writing a Will, known as 'intestate', your affairs are distributed according to the rules of intestacy and in some cases your estate may go to the Crown instead of to the people you would want to benefit.
Plus if you’re unmarried, your partner will have no right to your estate under the rules. If you’re unmarried without children, do you really want your assets to be divided between your parents, your siblings, distant relatives or (even worse!) going to the Crown?
Writing a Will lets you take control of your affairs and prevents your loved ones from being burdened with the difficulty of sorting out your estate after your death. Plus it’s a good chance to do something good and let those charities get some tax-free cash. Go on - make a Will today!
More information on Wills
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Article: Why you should be making a Will today
Article: The rules of intestacy
Article: How to leave personal possessions in your Will
Article: How to name guardians for your children
Article: The times when you need to revise your Will
Article: Separated? Divorced? Find out why you should be making a Will
Article: Why unmarried couples are in financial danger without a Will
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