Lucinda Frostick
When clients choose to include charitable gifts in their Will, the default position is often to leave a fixed amount, but structuring donations as a percentage gift can be greatly advantageous – for clients and charities alike. As advisers, you play a vital role in helping them understand the full range of options available to them – including how they structure their gift. So, what are the potential benefits of donating a small share to charity (residuary gift) as opposed to a fixed sum?
Here, we explore some of the key reasons your clients might want to consider this approach, and what this could mean to vital charitable services who receive them.
The impact of gifts in Wills
A vital source of income for good causes, gifts in Wills have become an increasingly popular way of donating, funding crucial services and core operations for charities and community-based organisations across the UK. In fact, around 1 in 6 Wills at probate (17%) now include a charitable gift[1].
Even modest gifts can make a substantial collective impact for charities, enabling them to continue to deliver their vital services for generations to come. While percentage gifts are in the minority, they now account for over 90% of total legacy income for charities. Gift values vary widely across the legacy spectrum, but the average value of a percentage gift is around £65k, compared with £4.5k for charitable legacies of a fixed sum[2].
And for the public, legacy giving can be a deeply meaningful way for individuals to make a lasting impact – reflecting their values and helping to ensure the causes they care about continue to thrive and create transformational change beyond their lifetime.
What are the advantages for clients?
Structuring a gift as a percentage can offer advantages for clients seeking flexibility, tax-efficiency, and long-term impact: particularly in light of changing Inheritance Tax (IHT) rules.
Unlike donations of a fixed sum, a percentage gift to charity can help ensure that the donation remains proportional to the estate’s final value. With property values, investments, and living costs all subject to change, this flexibility can be hugely reassuring to clients who are keen to help charities without needing to commit to an exact figure. What’s more, that share can be as small or large as the client chooses.
Importantly, leaving a percentage also inflation-proofs the gift. A fixed sum left today may lose significant value by the time the estate is administered years or decades later. Conversely, if a client’s estate is depleted, a fixed amount could again leave the donation out of kilter with gifts for fellow beneficiaries. But a percentage share is likely to retain its relative worth within the estate, regardless of when the gift is realised.
This approach also reassures clients that they can balance their charitable giving with provisions for their loved ones, as the share is calculated after any specific gifts and liabilities are settled.
While all charitable gifts are free of tax, clients that donate 10% or more of their net estate to charity can benefit from a reduced IHT rate of 36%. This creates a valuable reduction that benefits the estate and any beneficiaries. And, with the Chancellor’s proposed IHT changes drawing pension wealth into the scope of IHT from 2027, the tax reliefs for legacy giving are becoming an increasingly relevant consideration for a wider number of clients’ estate planning. So, making a gift of 10% or more can offer considerable advantages for such clients.
For some clients, a fixed gift of a lump sum is absolutely the right approach. But highlighting the potential to structure that gift as a small share can help inspire supporters to make their gift go even further in achieving their charitable goals.
How you can help?
As a legal adviser, your role can make all the difference. Our research with the Cabinet Office Behavioural Insights Team shows that simply referencing the option of leaving any form of gift can double the likelihood of a client choosing to include a legacy gift.
Including a charitable gift won’t be the right decision for everyone – but it’s important for clients to understand and be aware of all the options available to them.
Remember A Charity is a consortium of close to 200 UK charities, working together to make charitable gifts in Wills a social norm by raising awareness and increasing understanding amongst the public.
We work closely with the legal sector to make charitable legacies a natural part of every Will-writing conversation. Find out more about our free Campaign Supporter scheme, and access free resources to help you get the conversation started, at rememberacharity.org.uk/advisers