Charitable giving in a Will

[Dod101]

A deed of variation is very simple. It does not even need to be a deed (a 'Letter of Variation' is fine) and it only needs to be signed by those varying downwards their entitlement from the estate. The HMRC website sets out clearly the requirements. The thing you do need to be careful of is to include certain clauses re taxation.
When I was executor (and the one giving away my entitlement from the estate), I did it myself. I gave a copy to the solicitor dealing with the probate application and she was perfectly happy with it. It is not a big deal. HMRC is, I think, only really interested where IHT is affected by it.

I think it is dangerous to treat variations to a Will lightly. Changes can come back and bite and if the Deed (or letter) is not drawn up properly and some beneficiary has a change of heart it could be awkward for the Executor (or indeed costly) And remember, although the legatee is no longer with us, I hope Executors would at all times respect his/her wishes as set out in the Will. That is why I would not want to leave too many opportunities for change in my Will. The Will sets out what I want and certainly with leaving legacies to charities, I know who I want to leave money to and do not want to hand that decision to my Executors to exercise their discretion. I feel strongly which charities I want to benefit and they are not some animal sanctuary! And of course this discussion is about exactly the chance to reduce IHT payable and so HMRC would be interested that any Deed of Variation is drawn up properly!

Dod

[Dod101]

Very interesting page from the tax manual

https://www.gov.uk/hmrc-internal-manual ... /ihtm45008

That is interesting but the amount that I am giving to charity is bigger than I would want to leave to a single charity. I suppose the clause could be modified to cover three or four charities. That must apply to many of us here.

And as a PS, as mc2fool has pointed out that invites the charity or charities to do their own calculation of how much they are due and they can only do that by a careful scrutiny of the estate accounts.

Dod

[mc2fool]

Very interesting page from the tax manual

https://www.gov.uk/hmrc-internal-manual ... /ihtm45008

Well, yes, interesting but as it would name the charity in the will it suffers the undesirable scrutiny and hassle for the executors you wanted to avoid....

[hiriskpaul]

Very interesting page from the tax manual

https://www.gov.uk/hmrc-internal-manual ... /ihtm45008

Well, yes, interesting but as it would name the charity in the will it suffers the undesirable scrutiny and hassle for the executors you wanted to avoid....

Well no. There are 2 types of hassle from the charities:

1) Charity named in Will and given pecuniary legacy. Charity pesters executors over when the payment will be made.
2) Charity named in Will and give a part of the residuary estate. Charity has the legal right to receive accounts and can become very difficult over the way an estate has been administered.

Type 1 hassle just requires the executors to say "you will be paid when I am good and ready". Type 2 hassle is potentially in a whole different league of hassle.

The way I read it, the approach from the HMRC manual avoids Type 2 hassle because the charity is given a pecuniary legacy, but that legacy is not fixed until the probate value of the estate is fully determined.

Perhaps this could be extended to avoid Type 1 hassle by combining with "Charites to be specified at the absolute discretion of my executors".

Personally I don't think Type 1 hassle is a big deal and like Dod I think I might prefer be to pin down precisely who I left money to, perhaps with some words so that my executors could substitute another charity if one that was nominated stopped being a registered charity.

[mc2fool]

The way I read it, the approach from the HMRC manual avoids Type 2 hassle because the charity is given a pecuniary legacy, but that legacy is not fixed until the probate value of the estate is fully determined.

Well that'd be good if so, but how do you read that? The specification of a %age (even within £ boundaries) looks like a residual amount to me.

[hiriskpaul]

The way I read it, the approach from the HMRC manual avoids Type 2 hassle because the charity is given a pecuniary legacy, but that legacy is not fixed until the probate value of the estate is fully determined.

Well that'd be good if so, but how do you read that? The specification of a %age (even within £ boundaries) looks like a residual amount to me.

I am not totally sure about it, but the legacy is based on a percentage of the "baseline amount". To me this looks more like a legacy, to be paid ahead of sharing out the residuary estate and so the charity would not be a residuary beneficiary.

[scrumpyjack]

A deed of variation is very simple. It does not even need to be a deed (a 'Letter of Variation' is fine) and it only needs to be signed by those varying downwards their entitlement from the estate. The HMRC website sets out clearly the requirements. The thing you do need to be careful of is to include certain clauses re taxation.
When I was executor (and the one giving away my entitlement from the estate), I did it myself. I gave a copy to the solicitor dealing with the probate application and she was perfectly happy with it. It is not a big deal. HMRC is, I think, only really interested where IHT is affected by it.

I think it is dangerous to treat variations to a Will lightly. Changes can come back and bite and if the Deed (or letter) is not drawn up properly and some beneficiary has a change of heart it could be awkward for the Executor (or indeed costly) And remember, although the legatee is no longer with us, I hope Executors would at all times respect his/her wishes as set out in the Will. That is why I would not want to leave too many opportunities for change in my Will. The Will sets out what I want and certainly with leaving legacies to charities, I know who I want to leave money to and do not want to hand that decision to my Executors to exercise their discretion. I feel strongly which charities I want to benefit and they are not some animal sanctuary! And of course this discussion is about exactly the chance to reduce IHT payable and so HMRC would be interested that any Deed of Variation is drawn up properly!

Dod

In the case of my deed of variation it was only my wife and I who were varying our entitlement, so it was very simple.
If the Will leaves say 10% of the net estate to charities a DOV would only be necessary if a named charity was being asked to give up its entitlement and I can't see that remotely being the case. A DOV is not needed if the Will does not name the charities but the Executor decides, whether following a letter of wishes or not, as there is no entitlement being varied.

[yorkshirelad1]

An interesting thread. Based on previous reading of TLF along these lines, I have pretty much followed this route my Will.

• There is a clause in the will that directs the exors to put 25% of my estate to charities as the exors may select.
• There is a letter of wishes with the will which says that although I am giving the exors complete discretion as to which & how much charities shall benefit, it is my wish that the 25% share goes to a CAF Legacy account* that I have set up and update from time to time

This hopefully gives me flexibility to change the charities over time without having to change my will, allows for charities ceasing to exist (as I have a list of charities on the CAF Legacy account, to be divided equally amongst them, and if one ceases to exist, the amount will be divided equally amongst the remainder), and neither CAF nor the charities should have any recourse to the exors or the estate.


*: CAF Legacy account https://www.cafonline.org/my-personal-giving/long-term-giving/legacies/legacy-service-for-advisors
(I have no connection with CAF other than as a customer; they do charge a fee; other providers may be available)

[Dod101]

Very interesting page from the tax manual

https://www.gov.uk/hmrc-internal-manual ... /ihtm45008

Well, yes, interesting but as it would name the charity in the will it suffers the undesirable scrutiny and hassle for the executors you wanted to avoid....

Well no. There are 2 types of hassle from the charities:

1) Charity named in Will and given pecuniary legacy. Charity pesters executors over when the payment will be made.
2) Charity named in Will and give a part of the residuary estate. Charity has the legal right to receive accounts and can become very difficult over the way an estate has been administered.

Type 1 hassle just requires the executors to say "you will be paid when I am good and ready". Type 2 hassle is potentially in a whole different league of hassle.

The way I read it, the approach from the HMRC manual avoids Type 2 hassle because the charity is given a pecuniary legacy, but that legacy is not fixed until the probate value of the estate is fully determined.

Perhaps this could be extended to avoid Type 1 hassle by combining with "Charites to be specified at the absolute discretion of my executors".

Personally I don't think Type 1 hassle is a big deal and like Dod I think I might prefer be to pin down precisely who I left money to, perhaps with some words so that my executors could substitute another charity if one that was nominated stopped being a registered charity.

I am inclined to go with mc2fool on the HMRC wording because it seems to me that the amount of the pecuniary legacy to the charity(ies) is dependent on a calculation of the probate value at least and that may give the charity scope for argument but it would be interesting to know if anyone has tested that clause in practice because the wording is surely helpful otherwise.

Dod

[hiriskpaul]

An interesting thread. Based on previous reading of TLF along these lines, I have pretty much followed this route my Will.

• There is a clause in the will that directs the exors to put 25% of my estate to charities as the exors may select.
• There is a letter of wishes with the will which says that although I am giving the exors complete discretion as to which & how much charities shall benefit, it is my wish that the 25% share goes to a CAF Legacy account* that I have set up and update from time to time

This hopefully gives me flexibility to change the charities over time without having to change my will, allows for charities ceasing to exist (as I have a list of charities on the CAF Legacy account, to be divided equally amongst them, and if one ceases to exist, the amount will be divided equally amongst the remainder), and neither CAF nor the charities should have any recourse to the exors or the estate.


*: CAF Legacy account https://www.cafonline.org/my-personal-giving/long-term-giving/legacies/legacy-service-for-advisors
(I have no connection with CAF other than as a customer; they do charge a fee; other providers may be available)

Is that 25% of your estate, or 25% of your residuary estate? Does it completely remove the risk of pestering charities?

I am not sure why you need to use CAF at all. Why not just print our a new copy of your letter of wishes each time you change your mind?

[mc2fool]

An interesting thread. Based on previous reading of TLF along these lines, I have pretty much followed this route my Will.

• There is a clause in the will that directs the exors to put 25% of my estate to charities as the exors may select.
• There is a letter of wishes with the will which says that although I am giving the exors complete discretion as to which & how much charities shall benefit, it is my wish that the 25% share goes to a CAF Legacy account* that I have set up and update from time to time

This hopefully gives me flexibility to change the charities over time without having to change my will, allows for charities ceasing to exist (as I have a list of charities on the CAF Legacy account, to be divided equally amongst them, and if one ceases to exist, the amount will be divided equally amongst the remainder), and neither CAF nor the charities should have any recourse to the exors or the estate.

*: CAF Legacy account https://www.cafonline.org/my-personal-giving/long-term-giving/legacies/legacy-service-for-advisors
(I have no connection with CAF other than as a customer; they do charge a fee; other providers may be available)

Is that 25% of your estate, or 25% of your residuary estate? Does it completely remove the risk of pestering charities?

I am not sure why you need to use CAF at all. Why not just print our a new copy of your letter of wishes each time you change your mind?

Good question, but if you scroll down the linked-to page and click on "wording" under "1. Name CAF" there's some interesting phrases for the will that (sort of) cover one of the points under question earlier.

"I GIVE my residuary estate to my executors and trustees to sell call in or convert the same AND AFTER the payment of all my debts funeral and testamentary expenses to hold the remainder on trust for the Charities Aid Foundation (‘CAF’) of 25 Kings Hill Avenue West Malling Kent ME19 4TA (RCN 268369) to be distributed by CAF for charitable purposes AND I REQUEST (without creating any binding trust or obligation) that CAF give effect to any written expression of wishes left by me relating to the distribution of such legacy ..."

[yorkshirelad1]

Is that 25% of your estate, or 25% of your residuary estate? Does it completely remove the risk of pestering charities?

I am not sure why you need to use CAF at all. Why not just print our a new copy of your letter of wishes each time you change your mind?

it's 25% of my residuary estate. I don't suppose anything will stop a pushy charity but it might deter the alleged charities that scan Wills at probate but hopefully I've done enough to give my exors an easier time, and given the exors discretion. I quite like the suggestion someone else noted of putting in a clause that any charity that causes hassle will get nothing, but I don't suppose that would stand too well.

Using CAF: at the moment, administratively, it's easier to change the list held on my CAF Legacy account. Changing my letter of wishes would (a) involve solicitor's time (Will and LoW held by solicitor), and (b) I don't particularly want several versions of my LoW in existence, which could lead to confusion even though they're dated; my LoW has several other items in it as well, and it could cause a bit of a headache if it was thought there might be other versions in existence. There's just one LoW at present, and it's the same date as my Will.

[hiriskpaul]

I am minded to keep things simple rather than insert a complex legal clause involving a calculation. Something along these lines:

I GIVE the following charitable legacies

Charity 1 £
Charity 2 £
...

Delete any charitable legacy if the said charity loses its charitable status.

I hereby confer on my executors the power in their absolute discretion to increase any of the charitable legacies subject to an overall limit of 10% of my estate being given to charity.

My executors in making payment of the charitable legacies given by this clause:
- shall be entitled to accept in full discharge the receipt of the secretary, treasurer or other officer of the charity concerned;
- may appropriate assets not otherwise specifically bequeathed to satisfy (or partly satisfy) a charitable legacy without the consent of any beneficiary under my will or any codicil.

Hopefully that would clear enough and give PRs sufficient power to act without having to use a letter of variation.

[scrumpyjack]

The CAF takes 3.6% in fees I think, which could be quite a large amount! I would not involve them.

[yorkshirelad1]

The CAF takes 3.6% in fees I think, which could be quite a large amount! I would not involve them.

The brochure at the url I quoted above suggests 1%. CAF do charge, but it's a useful facility to have at present (and it's at exor's discretion), and it may make my exor's duties a bit easier (which is important to me). Any professional adviser/service is going to charge something.

[Dod101]

I am minded to keep things simple rather than insert a complex legal clause involving a calculation. Something along these lines:

I GIVE the following charitable legacies

Charity 1 £
Charity 2 £
...

Delete any charitable legacy if the said charity loses its charitable status.

I hereby confer on my executors the power in their absolute discretion to increase any of the charitable legacies subject to an overall limit of 10% of my estate being given to charity.

My executors in making payment of the charitable legacies given by this clause:
- shall be entitled to accept in full discharge the receipt of the secretary, treasurer or other officer of the charity concerned;
- may appropriate assets not otherwise specifically bequeathed to satisfy (or partly satisfy) a charitable legacy without the consent of any beneficiary under my will or any codicil.

Hopefully that would clear enough and give PRs sufficient power to act without having to use a letter of variation.

Just remember (if that is what you mean) that it might well be better to say '10% of my chargeable estate'. That is the test for a 10% reduction in the IHT rate.

Dod

[genou]

[

As a letter of wishes does not bind the PRs, it would have course mean that if the charities were only listed in the letter of wishes, the PRs could choose charities according to their own preferences. So you do need to trust that your PRs will respect your letter of wishes.

I am late to the party here, but for completeness: this is not at all how it works in Scottish law. A bog-standard Scottish will almost certainly contain a clause :

I direct my executor to give effect to any writings subscribed by me however informal the same may be provided that in the opinion of my executor they clearly express my intentions.


Some people get carried away by this : https://www.scotcourts.gov.uk/search-ju ... 0000d74aa7 ( sixteen documents in addition to the will, you can guess why it ended up in court ) , but in no sense are these informal writings merely a wish, they are instructions to the executor.

[Dod101]

[

As a letter of wishes does not bind the PRs, it would have course mean that if the charities were only listed in the letter of wishes, the PRs could choose charities according to their own preferences. So you do need to trust that your PRs will respect your letter of wishes.

I am late to the party here, but for completeness: this is not at all how it works in Scottish law. A bog-standard Scottish will almost certainly contain a clause :

I direct my executor to give effect to any writings subscribed by me however informal the same may be provided that in the opinion of my executor they clearly express my intentions.


Some people get carried away by this : https://www.scotcourts.gov.uk/search-ju ... 0000d74aa7 ( sixteen documents in addition to the will, you can guess why it ended up in court ) , but in no sense are these informal writings merely a wish, they are instructions to the executor.

I must say that although the clause you mention is in my Will, I am not very happy about it for the reasons which gave rise to this Court case; interpreting what the informal writings actually mean. Incidentally I think I know Robert Bolton, the solicitor involved. In fact, come to think of it, I owned the house he once lived in. Scotland is a small place.

Dod

[genou]

[

As a letter of wishes does not bind the PRs, it would have course mean that if the charities were only listed in the letter of wishes, the PRs could choose charities according to their own preferences. So you do need to trust that your PRs will respect your letter of wishes.

I am late to the party here, but for completeness: this is not at all how it works in Scottish law. A bog-standard Scottish will almost certainly contain a clause :

I direct my executor to give effect to any writings subscribed by me however informal the same may be provided that in the opinion of my executor they clearly express my intentions.


Some people get carried away by this : https://www.scotcourts.gov.uk/search-ju ... 0000d74aa7 ( sixteen documents in addition to the will, you can guess why it ended up in court ) , but in no sense are these informal writings merely a wish, they are instructions to the executor.

I must say that although the clause you mention is in my Will, I am not very happy about it for the reasons which gave rise to this Court case; interpreting what the informal writings actually mean. Incidentally I think I know Robert Bolton, the solicitor involved. In fact, come to think of it, I owned the house he once lived in. Scotland is a small place.

Dod

You are in an interesting place then. You can just leave no IWs, and that'll solve it. At the moment I don't have any myself, but I think I would adopt the approach that on any alteration to such an IW I destroy and replace rather than add layers. The only reason I can think to use one is precisely to add legacies to charity to my will.

I think the Grays were pretty much outliers in their "oh, and another thing" approach. I know my FiL ran his IW past his lawyer just for comfort.

[Howard]

Amusing thread.

Surely one either wants to give to selected charities or not?

Some posts seem to treat them as adversaries with terms such as “pester”. If a charity is left a significant amount in a will isn't it the charity’s duty to claim it?

No serious investor would back a company that was lackadaisical in collecting substantial revenues due to it, so why support a charity that allowed executors to cheat it out of legacies?

The best way to write a will is surely to clearly state the amount to go to each charity supported. And every few years check this and update if necessary. The cost of re-writing a will or adding a codicil is relatively small.

Isn’t it even better to ensure that charities deserve the amounts left in a will by giving to them while one is alive and interacting with them and their management to check they are being run effectively?

regards

Howard