Warren Buffett, co-founder of the Giving Pledge, famously said that he would leave his children “enough so they can do anything, but not enough so they can do nothing.”
The Giving Pledge is a charitable campaign to encourage wealthy people to contribute a majority of their wealth to philanthropic causes. Since Buffett and Bill Gates founded the Pledge in 2010, leaving money to charity rather than children has become mainstream amongst A-listers: in 2021 Buzzfeed identified ’17 Celebs Who Won’t Leave Their Kids An Inheritance’, including Mark Zuckerberg, Daniel Craig and Gordon Ramsay.
These may be the bequests which hit the headlines, but charities value every donation and many rely on a steady stream of legacy income from across society. And testators can benefit too; not only are gifts to charity exempt from inheritance tax, but if at least 10% of the net estate is left to charity, gifts to non-charitable beneficiaries will be taxed at a reduced rate of 36% rather than 40%.
Knowing that you will be making a difference even after death can be enormously rewarding during life, but it is worth taking the time to plan.
1. Think about what you want your gift to achieve
Maybe you want to support a global cause you care about – medical research, ecology, human rights – or give back to an organisation which has helped you or a loved one, such as mental health support or hospice nurses. Think also about the scale of your gift; a large legacy to a small charity could change its work entirely, which they might welcome the opportunity to discuss and plan with you in advance.
2. Choose your charity or charities
You may already have a longstanding donor relationship, or particular charities you already feel drawn to within the sector you want to support, but if not, part of the ‘fun’ can be choosing who you would like to benefit. Research online, search keywords on the Charity Commission website, or look close to home; many local causes such as community gardens and school Parent Teacher Associations will have charitable status.
3. Consider lifetime donations
There are two advantages: first, many charities will communicate regularly with donors, which may allow you to feel more involved in your chosen cause and increase your understanding of how your legacy might be used in the future (in addition to, of course, giving increased benefit to the charity). Second, if the worst should happen and your decision to leave money to charity is challenged after your death, a lifetime relationship with that charity is helpful evidence that you understood the choice you were making.
4. How do you want your gift to be used?
If you have a specific intention for your gift, for example to fund a particular project or focus on a particular geographical area, you may decide to mention this in your will. Do take legal advice when doing so, as the precise wording of the gift can affect whether the charity is able to apply your gift for other purposes if it is not possible to carry out your wishes. (Charities themselves will prefer a legacy to be given with no restrictions, so that they have maximum flexibility to apply it as needed.)
And on a more serious note:
5. Make your intentions known
If you are leaving a substantial legacy (or even your entire estate) to charity, and your family are not expecting it, they may well be upset. In a worst-case scenario, they may be unable to accept your decision and challenge the validity of your will. Every family will be different, but in some cases, giving children or other relatives advance notice can help them come to terms with your intentions – indeed, Warren Buffett’s other piece of advice at the 2018 Forbes 400 Summit on Philanthropy was that he would seek his children’s feedback on his will before executing it.
6. Take professional advice
As mentioned above, giving to charity can have inheritance tax advantages which a solicitor will be able to advise on (as well as helping you to consider what to do if, for example, your chosen charity ceases to exist). And involving a solicitor will mean that, in the event of a dispute, an independent professional can verify having spoken to you and advised you on your options.
For further information, please contact:
Rosalind Russell, Withersworldwide
rosalind.russell@withersworldwide.com
