Flexible amount given to charitable trust in will?

[Gilgongo]

I'm thinking about wills and whatnot as I don't have one yet. I'd like to leave something to charity, but can't really decide which charities or how much to give to each. So I think I might put a charitable trust in my will which gives an amount to the trust, and the letter of wishes could talk about distribution to certain types of charity maybe.

Anyway, if the estate is quite large (eg over £2M), my executors might find that giving more to charity might result in the beneficiaries getting more inheritance. Or it might be the other way around. I hope all this will be many years in the future.

I can ask a solicitor of course, but could the will say something like, "My executors shall gift a proportion of my estate to the trust no less than £10,000, which proportion or amount should maximise the residue to my beneficiaries"? Or would they be able to make a deed of variation to change the amount given to the trust for the same reason?

I'd like to give 10%, but don't want to worry about that turning out to be too much (or too little!) for IHT reasons.

G

[Dod101]

Well to get a reduction in IHT, you need to leave at least 10% of the amount of the chargeable estate to charity. That reduces the IHT to 36%. I have not found that that actually increases the amount left to other beneficiaries but it certainly helps.

I am leaving specific sums to various charities. Do not leave any residue to the charity or they will go through the accounts with a fine tooth comb. As to which charity(ies) you could leave that to the discretion of the executors but I must say I prefer to nominate my charities now. In my case mostly medical ones. I would not want my money left to an animal charity for instance.

Keep mulling things over and see if you can clarify your thoughts a bit.

Dod

[DrFfybes]

Well to get a reduction in IHT, you need to leave at least 10% of the amount of the chargeable estate to charity. That reduces the IHT to 36%. I have not found that that actually increases the amount left to other beneficiaries but it certainly helps.

Dod

That was my maths as well. The anout left must be 10%, to reduce IHT by 10%, however IHT is only above the NRB so there will always be less for the other beneficiaries

I am leaving specific sums to various charities. Do not leave any residue to the charity or they will go through the accounts with a fine tooth comb.

I would also avoid naming the charities in the Will. When mum died there were a couple of bequests to specific charities, which I paid. About 6 months later Christie Cancer Hospital sent a letter that I found threatening in tone bordering on accusatory, explaining how they used a tracing company to find me and reminding me in no uncertain terms of my legal obligations to pay them. I looked up the tracing comapny, they'd recently restructured and paid their directors several Million quid in Dividends. I sent Christie a scan of the relevant bank statement showing the card payment and the entire family made a note never to donate to them again.

The other was BHF, we went in, filled in their "money left in a will" form, and paid by card. They sent a much more polite letter about a year later, so I simply returned a scan of the form.

Paul

Footnote - I wasn't going to name Christie, but to be honest if they do a search and find this then they might want to reconsider how they write to people during a time of potential grief and stress.

[SteelCamel]

Well to get a reduction in IHT, you need to leave at least 10% of the amount of the chargeable estate to charity. That reduces the IHT to 36%. I have not found that that actually increases the amount left to other beneficiaries but it certainly helps.

Leaving money to charity can't benefit the other beneficiaries over leaving nothing to charity. However if you've leaving something to charity anyway, there are cases where increasing the amount also gives the other beneficiaries more (at the expense of the taxman, of course).

If you have a chargeable estate of £1m:
Leaving £90k to charity means the other beneficiaries get 60% of 910k i.e. £546k.
If you increase that to £100k, they get 64% of 900K i.e. £576k.
If you leave nothing to the charity, they get 60% of £1m i.e. £600k.

[yorkshirelad1]

Setting up a charitable trust in a will may just add a layer of complexity and cost for your exors. You could earmark a certain amount to be given to charity, the charity/charities left to your exors' discretion, and leave a letter of wishes identifying those charities, as other have said. You could also leave the that same certain amount to e.g. a Legacy account at CAF. You add a list of charities attached to the Legacy account, which you can change from time to time (easier than changing your will). Just a thought. I have no connection with CAF https://www.cafonline.org/my-personal-giving/long-term-giving/legacies. Other providers may exist.

[Dod101]

Well to get a reduction in IHT, you need to leave at least 10% of the amount of the chargeable estate to charity. That reduces the IHT to 36%. I have not found that that actually increases the amount left to other beneficiaries but it certainly helps.

Leaving money to charity can't benefit the other beneficiaries over leaving nothing to charity. However if you've leaving something to charity anyway, there are cases where increasing the amount also gives the other beneficiaries more (at the expense of the taxman, of course).

If you have a chargeable estate of £1m:
Leaving £90k to charity means the other beneficiaries get 60% of 910k i.e. £546k.
If you increase that to £100k, they get 64% of 900K i.e. £576k.
If you leave nothing to the charity, they get 60% of £1m i.e. £600k.

Yes there is that window where increasing the amount left to charity which reduces the IHT charge from 40% to 36% does indeed benefit the residual beneficiaries so it is worthwhile to try ensure that you are able to leave 10% of the chargeable estate to charity.

Dod

[Dod101]

It is a shame that charities have got a bad name in pressing for payment via a Will because I have always found them to be the opposite when I have given them donations in life.

Dod

[pochisoldi]

There is a standard form of words devised by STEP (Society of Trust and Estate Practitioners) which can be used to give the executors discretion to increase the charitable donation to take advantage of the reduced rate of IHT.

I would advise sticking to advice given here many moons ago (probably by ClitheroeKid) to use standard "forms of words" to describe the "what" in wills. Those standard forms of words have standard meanings and interpretations by anyone with experience of wills/probate, and will result in the testator's desired outcome being achieved.

Also giving the executor(s) discretion, along with a separate "expression of wish" document which does not form part of the will, should avoid having executors being harassed by charities "chasing their entitlement".

[Gilgongo]

There is a standard form of words devised by STEP (Society of Trust and Estate Practitioners) which can be used to give the executors discretion to increase the charitable donation to take advantage of the reduced rate of IHT.

Thanks - that's good to know.

Setting up a charitable trust in a will may just add a layer of complexity and cost for your exors.

Indeed - and I wonder if I could use the above STEP wording with the gift to CAF in that case (although CAF seem to assume a fixed amount)? That would avoid having to set up a trust in the will to do the same thing.

[Dod101]

There is a standard form of words devised by STEP (Society of Trust and Estate Practitioners) which can be used to give the executors discretion to increase the charitable donation to take advantage of the reduced rate of IHT.

Thanks - that's good to know.

Setting up a charitable trust in a will may just add a layer of complexity and cost for your exors.

Indeed - and I wonder if I could use the above STEP wording with the gift to CAF in that case (although CAF seem to assume a fixed amount)? That would avoid having to set up a trust in the will to do the same thing.

I am puzzled. Why bother with giving executors discretion or setting up trusts. Just say, ‘I give £xxxx to RNLI (or whatever charity you favour) I see no reason to give my executors any discretion. It is my money and I know where I want it to go. It might be sensible to ensure that you are giving at least 10% of the chargeable estate to charity but that is the only discretion I would allow my executors.

Dod

[Gilgongo]

It might be sensible to ensure that you are giving at least 10% of the chargeable estate to charity but that is the only discretion I would allow my executors.

I agree it's a bit puzzling, but you may have missed my original point: I can't decide which charity (or charities) I want to give to, and I don't want to hamper my executives ability to maximise what goes to my other beneficiaries. I also don't know what my estate will be like in many years time, nor do I want to be re-writing my will/wishes too often (if at all). So I'd rather just hand the issue of charity giving to my executors and be done with it. The legacy aspect of my will it not that important - just as long as I pass on something to good causes I'm not too fussed. The question is how I do that exactly.

[CliffEdge]

Why leave money to charity in your will?

[tjh290633]

Why leave money to charity in your will?

Why make donations to charity while you are alive?

TJH

[CliffEdge]

Why leave money to charity in your will?

Why make donations to charity while you are alive?

TJH

Giving money to charities is very pleasurable I find. Why don't you give it a go?

[tjh290633]

Why make donations to charity while you are alive?

TJH

Giving money to charities is very pleasurable I find. Why don't you give it a go?

I do. I also have left bequests in my will to two of my favourite charities. Bequests can be more generous than gifts from income.

You clearly have no idea what you are talking about, having first posed a question then jumped to a conclusion about an obvious response.

TJH

[pochisoldi]

At the risk of sounding like a moderator, can we stick to answering the original poster's question?

[tjh290633]

At the risk of sounding like a moderator, can we stick to answering the original poster's question?

And that surely boils down to whether you can specify a fixed amount or an amount to be determined by the size of the estate at death. If it is the remainder after all other bequests have been paid, then that is clearly possible. But can one specify, say, "10% of the amount which is subject to IHT" for example?

TJH

[Dod101]

At the risk of sounding like a moderator, can we stick to answering the original poster's question?

And that surely boils down to whether you can specify a fixed amount or an amount to be determined by the size of the estate at death. If it is the remainder after all other bequests have been paid, then that is clearly possible. But can one specify, say, "10% of the amount which is subject to IHT" for example?

TJH

I do not see why you could not say that. It would just mean an adjustment of the residue I suppose.

Dod

[Gilgongo]

And that surely boils down to whether you can specify a fixed amount or an amount to be determined by the size of the estate at death. If it is the remainder after all other bequests have been paid, then that is clearly possible. But can one specify, say, "10% of the amount which is subject to IHT" for example?

Some confusion here I think. My original question was whether the executors could be told to determine the amount going to charity (subject to a minimum I think else they might choose zero, which isn't my intention). If it's a percentage, then that's taken from the gross value after debts have been paid. But that's not relevant to my question.

[pochisoldi]

I would suggest clauses to do the following:
A) Specify a specific amount to be given to charity accordance with the expression of wish document.
OR
Specify a proportion of the residual estate to be given to charity in accordance... etc.
B) Include the STEP form of words to allow the executor to distribute to charity in order to benefit from the IHT reduction. (again in accordance with blah).

In any case, my opinion is that of an amateur. - anything beyond the most trivial estate shouldn't be distributed according to a DIY will. Draw up a list of intentions and speak to a solicitor, and get them to draft the will.

A vague/contradictory/"open to interpretation" DIY will is one way to ensure that lawyers benefit richly from your passing.