Charitable legacies: the role of a solicitor

The support provided by charities touches the lives of millions of people every day.

As a sign of their appreciation, many people decide to continue to support their favourite charity after they pass away by leaving a legacy in their will.

There are several reasons why people may choose to benefit a charity in their will.

Some people choose to leave a legacy to a charity that they already have close connections with, either personally or through someone close to them.

Other people have family members who they wish to exclude or no family or friends who they wish to benefit.

Another reason is to reduce the overall inheritance tax liability for their estate.

The solicitor’s process of including legacies in wills

All gifts to UK registered charities are tax-free, so for example, if the residue of an estate exceeds the available tax allowances, leaving the excess to charity can wipe out any inheritance tax liability for the estate.

Leaving a gift of 10% or more of the taxable estate to a charity reduces the inheritance tax rate for the rest of the estate from 40% to 36%.

The client chooses a charity

In the majority of cases, people who are considering leaving a legacy to a charity in their will have given it some thought in advance of seeing a solicitor and may have already selected their chosen charity.

In this event, a solicitor should check the chosen charity’s registered name, address and charity number, either from the charity’s website or from the Charity Commission website as part of the drafting process. In some situations, the client may not have chosen a specific charity, and in those cases, a solicitor is sometimes asked to make some suggestions of charities that may support the client’s particular area of interest.

On other occasions, clients are unable to make a decision or they wish to benefit several charities over time, in which case they may be advised to set up a charitable trust that will benefit various charities with a particular purpose.

It would then be the responsibility of the nominated trustees to decide how to use the money, which could include distributing to existing charities who meet the objectives of the charitable trust.

Fixed legacy or share of the estate?

A person can leave a fixed legacy to a charity or a share of the residuary estate, and this usually depends on the size of the legacy to be left to the charity.

Generally, if a large legacy is contemplated, then a share of residue may be more appropriate to ensure this takes account of the fluctuating value of people’s estates.

An alternative may be to use a discretionary trust in the will, with family members and some named charities as potential beneficiaries. These often include direction for the trustees to evaluate the situation at the time of the person’s death and, if the family members do not need financial support from the trust, a gift to a named charity could then be made at the discretion of the trustees.

In this situation, it is usually advisable to leave a non-binding letter of wishes with the will providing direction to the trustees on how to distribute the trust money.

Key considerations

Perhaps the most important aspect of the will-writing process is for the solicitor to ensure from the outset that the person has testamentary capacity and is not under any undue influence.

This involves ensuring that the person understands the nature and effect of the will, the extent of the property that they are disposing of under the will and that they are aware of the people they would usually be expected to provide for. If possible, it is important to meet the person face-to-face on their own, as this can make it easier for a solicitor to ensure that the client is not acting under pressure from anyone else.

As part of the drafting process, a solicitor should talk through with the person what their reasons are for leaving money to a particular charity, to gain a clear understanding of their wishes. This is especially important if there are potential family members who may bring a claim under the Inheritance (Provision for Family and Dependents) Act 1975.

A key part of the will-writing process is to ascertain whether there may be anyone who could bring such a claim, and commonly in such situations a Statement of Non-Provision is recommended.

The statement should confirm that the excluded person is not financially dependent on them and include details of why provision is not being made for the family member in question.

The solicitor’s notes should also detail the reasons why the particular charity was selected instead, so this can be used as evidence in court if a claim against the estate was then subsequently received.

In summary

Charities derive a substantial percentage of their income from will legacies, therefore it is important that people who are considering leaving charitable legacies are advised by a solicitor and have their wills professionally drafted.

Ensuring that all of the above points have been considered and properly dealt with, will reduce the risk of any future claims against the estate, protecting the person’s wishes and the charity far as possible.