Kerry Morgan-Gould, legal director, explains how just a 4% change in behaviour could result in an additional £1 billion for good causes in the UK each year.
It is estimated that the average person in the UK gives away £10 a month to good causes, and 96% of people who give to charity say that they do so because they feel a sense of duty to give back to society and tackle inequality, using their own good fortune to help others.
With increasing competition to gain a larger market share and a marked reduction in government funding to the third sector, the pressure is on charities to maximise and explore all potential revenue streams. The net result is that more and more charities are now beginning to target potential donors to request that they consider leaving them a gift in their wills, rather than simply lifetime gifts.
Slowly but surely the taboo about talking about what we intend to do with our assets after we die is lessening. Many more charities are becoming receptive to the idea of legacy fundraising, and seek to capitalise on what is a vital source of income. There are a number of significant charities that simply would not survive without gifts in wills.
Overcoming the psychology of approaching donors to request that they leave a gift in their will is perhaps the easy part; far more challenging is the task of persuading the adult population in the UK to make a will in the first place.
No will, no charitable legacy
A startling statistic is that according to a recent study by The Co-operative Funeralcare and Co-operative Legal Services, 60% of adults in the UK do not have a will. This equates to approximately 30 million adults. The reality is, therefore, that these people have very little control at all over what will happen to their money, property or possessions when they die.
The statistics also reveal that the average age that someone makes their first will in the UK is 42, with one in four people waiting until they are 55 years old. This is a staggering statistic, which clearly demonstrates that the majority of people in the UK are not planning effectively for what will happen to their affairs after they die. This could ultimately lead to upset, confusion and potentially unnecessary and wasted costs, particularly if a dispute subsequently arises between family members.
Why you should make a will
The benefits of making a will not only provides clarity and an element of certainty for those left behind, but also enables proper consideration to be given to the level of any inheritance tax (IHT) that may need to be paid on the estate, to maximise any potential savings.
The basic rule with regards to IHT is that an estate is potentially liable for IHT if it is valued at over and above £325,000 (nil-rate band). IHT is currently charged at 40%. There are exemptions and reliefs available, the most significant of which being:
- There is never IHT to pay on transfers between spouses.
- On the death of the second spouse it is possible to utilise the first spouse’s 'unused' nil-rate band, as well as the second spouse's. This means that the second spouse could have a nil-rate band of up to £650,000 before any tax is due.
- Any gifts made to a qualifying charity will be exempt from IHT. A qualifying charity is an organisation that's recognised as a charity for tax purposes with HMRC.
- The rate of IHT can be reduced to 36% if the deceased is deemed to have left over 10% of their net estate to charity.
Reassuringly, whether for tax reasons or a desire to leave a lasting legacy, 74% of the UK population support charities, and when asked, 35% of people said they would leave a gift in their will once family and friends have been provided for. The reality is, however, that only 7% of people actually do. You don’t need to be rich and famous to leave a gift in your will; just a 4% change in behaviour would result in an additional £1billion for good causes in the UK each year.
So, the task ahead has to be to encourage and educate the adult population in the UK to make a will, and thereafter, to explore the benefits of leaving a gift to charity, once family and friends have been provided for.
Increasingly, with competing demands on disposable income, leaving a gift in a will may be the most suitable option for those who wish to support their favourite charity, but are unable to do so during their lifetime.