Charitable giving in a Will

[hiriskpaul]

If someone wants to give 10% of the net value of their estate to charity and so qualify for the reduced rate of IHT, what are the options?

The 2 main ways as far as I can see are
1) put a clause in the Will that specifically specifies that 10% of the net estate should be left to charity.
2) use pecuniary legacies.

It seems to me that the advantage of 1 is simplicity. The PR calculates the net estate and pays the charities along with the other residuary beneficiaries. If the Will specifies pecuniary legacies, these are either going to end up overshooting or undershooting 10% of the net estate. If undershooting, the PRs will need to change the Will using an instrument of variation to bring the legacies up to 10%.

OTOH, specifying 10% of the net estate will mean that the charities become residuary beneficiaries. That can and sometimes does from what I have read, bring undesirable scrutiny and hassle from the charities.

Thoughts, experiences, tips anyone?

[mc2fool]

OTOH, specifying 10% of the net estate will mean that the charities become residuary beneficiaries. That can and sometimes does from what I have read, bring undesirable scrutiny and hassle from the charities.

IANAL but from previous comments on this board it seems one way to get round that is to specify in your will that 10% will go to charities as per your expression of wishes, which is a separate document (that you nevertheless staple to your will). Unlike the will, the letter of wishes isn't published and so can't be spotted and read by charities, etc.

AIUI the expression of wishes is not itself legally binding on your executors but the will is, so, e.g. if you say in your will that 10% will go to charities and you say in your letter of wishes that it should go to, say, Oxfam, your executors will be legally bound to give 10% to charity but not bound to give it to Oxfam, so may decide to give it to, say, GOSH, instead.

[hiriskpaul]

OTOH, specifying 10% of the net estate will mean that the charities become residuary beneficiaries. That can and sometimes does from what I have read, bring undesirable scrutiny and hassle from the charities.

IANAL but from previous comments on this board it seems one way to get round that is to specify in your will that 10% will go to charities as per your expression of wishes, which is a separate document (that you nevertheless staple to your will). Unlike the will, the letter of wishes isn't published and so can't be spotted and read by charities, etc.

AIUI the expression of wishes is not itself legally binding on your executors but the will is, so, e.g. if you say in your will that 10% will go to charities and you say in your letter of wishes that it should go to, say, Oxfam, your executors will be legally bound to give 10% to charity but not bound to give it to Oxfam, so may decide to give it to, say, GOSH, instead.

AIUI you should absolutely not staple a letter of wishes to your Will. Keep it with it, but not attached.

This is a very interesting suggestion though. AIUI anything written in an expression of wishes is not binding on the PRs, but I can see no reason why they would not pay the charities as specified in the expression of wishes, unless the charities lost their charitable status. If someone wrote in their Will 10% will go to charities as per your expression of wishes, it seems to me that this includes the expression of wishes into the Will, which binds the executors and reinstates the charities as residuary beneficiaries! OTOH, if the Will just said something like "I leave 10% of my not estate to charity at the discretion of my executors", then there would be no connection to the letter of wishes.

Would this actually work in keeping the charities off the backs of the PRs though?

[mc2fool]

OTOH, specifying 10% of the net estate will mean that the charities become residuary beneficiaries. That can and sometimes does from what I have read, bring undesirable scrutiny and hassle from the charities.

IANAL but from previous comments on this board it seems one way to get round that is to specify in your will that 10% will go to charities as per your expression of wishes, which is a separate document (that you nevertheless staple to your will). Unlike the will, the letter of wishes isn't published and so can't be spotted and read by charities, etc.

AIUI the expression of wishes is not itself legally binding on your executors but the will is, so, e.g. if you say in your will that 10% will go to charities and you say in your letter of wishes that it should go to, say, Oxfam, your executors will be legally bound to give 10% to charity but not bound to give it to Oxfam, so may decide to give it to, say, GOSH, instead.

AIUI you should absolutely not staple a letter of wishes to your Will. Keep it with it, but not attached.

This is a very interesting suggestion though. AIUI anything written in an expression of wishes is not binding on the PRs, but I can see no reason why they would not pay the charities as specified in the expression of wishes, unless the charities lost their charitable status. If someone wrote in their Will 10% will go to charities as per your expression of wishes, it seems to me that this includes the expression of wishes into the Will, which binds the executors and reinstates the charities as residuary beneficiaries! OTOH, if the Will just said something like "I leave 10% of my not estate to charity at the discretion of my executors", then there would be no connection to the letter of wishes.

Would this actually work in keeping the charities off the backs of the PRs though?

Ok, some interesting nuances, both re stapling (will paper clipping do? ) and wording in the will, there that I'll leave to legal beagles to comment on.

Re your final sentence, my understanding (also from reading these boards) is that the bigger charities have people that go through wills when they're published (which is after a grant of probate is issued) looking for bequests to them and, in particular when there are residuary bequests, then might start hassling the executors. Whether they will do so if they aren't actually named in the will I don't know but I haven't heard of any cases like that....

[Lootman]

Would this actually work in keeping the charities off the backs of the PRs though?

Ok, some interesting nuances, both re stapling (will paper clipping do? ) and wording in the will, there that I'll leave to legal beagles to comment on.

I am not a beagle either but I do not believe that such a letter needs to be "attached" to the Will at all. And that it may be better if it is more informal. The letter could even be given to the Executor whilst you are still alive. Or else filed in a place where it can be found by the Executor.

Surely best to talk to the Executor whilst you can about this, so they know what to expect. Then even if the letter was lost, the Executor would know your views and intentions.

Re your final sentence, my understanding (also from reading these boards) is that the bigger charities have people that go through wills when they're published (which is after a grant of probate is issued) looking for bequests to them and, in particular when there are residuary bequests, then might start hassling the executors. Whether they will do so if they aren't actually named in the will I don't know but I haven't heard of any cases like that....

Yes, it has always annoyed me that Wills become public during Probate (unless you are a Royal anyway). Seems the only way to avoid that is to avoid probate, say by giving away all your assets whilst alive.

But perhaps the "letter of wishes" idea can be extended, and the Will can be "skeletal" in nature. By this I mean that the Will is made void of any specifics and merely refers to the Executor "using his judgement" based on discussions that happened before death?

Then those charities scouring Probate files for residual bequests will see nothing to bite on. They won't even know such a "letter" exists if it is not mentioned.

[hiriskpaul]

Ok, some interesting nuances, both re stapling (will paper clipping do? ) and wording in the will, there that I'll leave to legal beagles to comment on.

I have been told not to do that, but I don't know the precise reasons. If something is attached to the Will I am fairly confident that you must not remove it before sending it to the Probate office.

Re your final sentence, my understanding (also from reading these boards) is that the bigger charities have people that go through wills when they're published (which is after a grant of probate is issued) looking for bequests to them and, in particular when there are residuary bequests, then might start hassling the executors. Whether they will do so if they aren't actually named in the will I don't know but I haven't heard of any cases like that....

Ok, so the charities might start hassling PRs before the PRs want them to if specifically named in the Will. That makes a lot of sense.

What I am more concerned about is that charities made residuary beneficiaries have stronger legal rights to question things than they would if they were given a fixed sum of money, or a specific asset. In fairness, I can see that charities may feel it is their duty to make sure that the estate is properly managed and they get what they are entitled to. Some way of avoiding extra hassle, whilst also allowing the executors to give precisely 10% to charity as per the deceased's wishes and without having to use an instrument of variation would be good.

[Dod101]

Going back to the original point, I have always been advised not to leave say, 10% of your chargeable assets to a or any charity but to leave a monetary amount because in the first case, the charity is entitled to see the entire accounts of the estate and may very well challenge either expenses or the amounts left to different beneficiaries. If you leave a pecuniary amount that is all they are entitled to and they can have no argument. That is the point that others have made. The drawback of course is that at the time of death the pecuniary legac(ies) may not amount to the 10% of the chargeable estate so I have left enough leeway that it should be covered. I think a letter to the Executors stating your wish that at least 10% of the chargeable estate should be left to charity reminds them that they can do a deed of variation to bring that amount up to at least the 10%. The only ones likely to object are the residuary beneficiaries although I have calculated that when we have the reduction in IHT to 36% rather than the standard 40%, my residuary beneficiaries will be at least no worse off. if all beneficiaries agree then a Deed of variation is straightforward enough.

I check my assets from time to time to try to ensure that the 10% is maintained.

Dod

[scrumpyjack]

It is very sensible not to have named charities in the Will. Apart from the problem of intrusive interference in the estate administration if charities know they are named, circumstances may change. We had some difficulty with my mother's Will in that she named a specific Charity (an amount rather than a percentage) but the Charity no longer existed when she died. We had to find a similar charity and I recall my brother had to get official approval that the replacement charity was acceptable.

I'm not sure you need even to refer to a letter of wishes in the Will but HMRC will I think need a specific list of intended charities, with their reg nrs, when you apply for probate.

I suppose you could put a clause in the Will that any Charity that bothers the executor about the bequest will be replaced as beneficiary at the executor's discretion That might shut them up!

[hiriskpaul]

Then those charities scouring Probate files for residual bequests will see nothing to bite on. They won't even know such a "letter" exists if it is not mentioned.

As far as I am aware a letter of wishes is for the executors'/trustees eyes only. It is entirely up to them whether they disclose it, or even disclose that it exists. I think the standard advice is not to mention the letter at all in a Will. Similarly with pensions. Send your letter of wishes to the pension trustees and don't mention it or your pension in the Will.

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.

[hiriskpaul]

It is very sensible not to have named charities in the Will. Apart from the problem of intrusive interference in the estate administration if charities know they are named, circumstances may change. We had some difficulty with my mother's Will in that she named a specific Charity (an amount rather than a percentage) but the Charity no longer existed when she died. We had to find a similar charity and I recall my brother had to get official approval that the replacement charity was acceptable.

I'm not sure you need even to refer to a letter of wishes in the Will but HMRC will I think need a specific list of intended charities, with their reg nrs, when you apply for probate.

I suppose you could put a clause in the Will that any Charity that bothers the executor about the bequest will be replaced as beneficiary at the executor's discretion That might shut them up!

Good point! I have recently filled in an IHT400 and applied for probate and you do have to list the charities.

Do you just list the charities specified in the letter of wishes, with the calculated donations?

What happens if the size of the estate subsequently changes, eg if assets are sold below the intial probate value?

[Dod101]

It is very sensible not to have named charities in the Will. Apart from the problem of intrusive interference in the estate administration if charities know they are named, circumstances may change. We had some difficulty with my mother's Will in that she named a specific Charity (an amount rather than a percentage) but the Charity no longer existed when she died. We had to find a similar charity and I recall my brother had to get official approval that the replacement charity was acceptable.

I'm not sure you need even to refer to a letter of wishes in the Will but HMRC will I think need a specific list of intended charities, with their reg nrs, when you apply for probate.

I suppose you could put a clause in the Will that any Charity that bothers the executor about the bequest will be replaced as beneficiary at the executor's discretion That might shut them up!

With respect, I would not allow this particular difficulty to influence me. I have three significant charitable legacies and would expect them all to be in existence when my Will is being administered. I have one small legacy which I think we have covered in case it changes in any way. I am very particular about the charities I want to benefit and do not want my trustees or executors to be exercising their discretion with what was my money.

And I do not think that the last suggestion, which I am sure was made in gest would hold water. I am sure it would not shut them up.

Dod

[hiriskpaul]

Going back to the original point, I have always been advised not to leave say, 10% of your chargeable assets to a or any charity but to leave a monetary amount because in the first case, the charity is entitled to see the entire accounts of the estate and may very well challenge either expenses or the amounts left to different beneficiaries. If you leave a pecuniary amount that is all they are entitled to and they can have no argument. That is the point that others have made. The drawback of course is that at the time of death the pecuniary legac(ies) may not amount to the 10% of the chargeable estate so I have left enough leeway that it should be covered. I think a letter to the Executors stating your wish that at least 10% of the chargeable estate should be left to charity reminds them that they can do a deed of variation to bring that amount up to at least the 10%. The only ones likely to object are the residuary beneficiaries although I have calculated that when we have the reduction in IHT to 36% rather than the standard 40%, my residuary beneficiaries will be at least no worse off. if all beneficiaries agree then a Deed of variation is straightforward enough.

I check my assets from time to time to try to ensure that the 10% is maintained.

Dod

Yes, that intrusive behaviour of charities is what concerns me.

Interesting thought - as I understand it, beneficiaries only need to sign a Deed of Variation if they are made worse off by a change. A small increase to charitable legacies, bringing the amount above 10%, is likely to make residuary beneficiaries better off, so would any need to sign at all?

[Dod101]

Going back to the original point, I have always been advised not to leave say, 10% of your chargeable assets to a or any charity but to leave a monetary amount because in the first case, the charity is entitled to see the entire accounts of the estate and may very well challenge either expenses or the amounts left to different beneficiaries. If you leave a pecuniary amount that is all they are entitled to and they can have no argument. That is the point that others have made. The drawback of course is that at the time of death the pecuniary legac(ies) may not amount to the 10% of the chargeable estate so I have left enough leeway that it should be covered. I think a letter to the Executors stating your wish that at least 10% of the chargeable estate should be left to charity reminds them that they can do a deed of variation to bring that amount up to at least the 10%. The only ones likely to object are the residuary beneficiaries although I have calculated that when we have the reduction in IHT to 36% rather than the standard 40%, my residuary beneficiaries will be at least no worse off. if all beneficiaries agree then a Deed of variation is straightforward enough.

I check my assets from time to time to try to ensure that the 10% is maintained.

Dod

Yes, that intrusive behaviour of charities is what concerns me.

Interesting thought - as I understand it, beneficiaries only need to sign a Deed of Variation if they are made worse off by a change. A small increase to charitable legacies, bringing the amount above 10%, is likely to make residuary beneficiaries better off, so would any need to sign at all?

I think you may be correct but I think it depends on how the solicitor drawing up the Deed of variation feels about it. I think most might ask that the beneficiaries affected sign anyway, just to cover themselves should there be a change in the value of any assets in the estate which might disadvantage them, however unlikely that may be.

Dod

[scrumpyjack]

Going back to the original point, I have always been advised not to leave say, 10% of your chargeable assets to a or any charity but to leave a monetary amount because in the first case, the charity is entitled to see the entire accounts of the estate and may very well challenge either expenses or the amounts left to different beneficiaries. If you leave a pecuniary amount that is all they are entitled to and they can have no argument. That is the point that others have made. The drawback of course is that at the time of death the pecuniary legac(ies) may not amount to the 10% of the chargeable estate so I have left enough leeway that it should be covered. I think a letter to the Executors stating your wish that at least 10% of the chargeable estate should be left to charity reminds them that they can do a deed of variation to bring that amount up to at least the 10%. The only ones likely to object are the residuary beneficiaries although I have calculated that when we have the reduction in IHT to 36% rather than the standard 40%, my residuary beneficiaries will be at least no worse off. if all beneficiaries agree then a Deed of variation is straightforward enough.

I check my assets from time to time to try to ensure that the 10% is maintained.

Dod

Yes, that intrusive behaviour of charities is what concerns me.

Interesting thought - as I understand it, beneficiaries only need to sign a Deed of Variation if they are made worse off by a change. A small increase to charitable legacies, bringing the amount above 10%, is likely to make residuary beneficiaries better off, so would any need to sign at all?

I think you may be correct but I think it depends on how the solicitor drawing up the Deed of variation feels about it. I think most might ask that the beneficiaries affected sign anyway, just to cover themselves should there be a change in the value of any assets in the estate which might disadvantage them, however unlikely that may be.

Dod

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.

[swill453]

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 helped my dad do a DoV for a legacy he'd received. It was 3 sentences, including the IHT wording. No solicitors were involved.

Scott.

[hiriskpaul]

One other thought, there is another difference between a pecuniary legatee and resduary legatee. A pecuniary legatee is only entitled to the precise amount of money specified in the Will, plus interest if not paid within 12 months. A residuary legatee is entitled to a proportion of the residuary estate plus a proportion of any after tax income and gains arising during the administration period. So if you left 10% of the net residuary estate to a charity, that charity may get more than if they were a named pecuniary legatee who would only receive 10% of the net probate value of the estate.

How does that fit into listing charites in the letter of wishes? eg if the Will said something like "I leave 10% of my net estate to charity. The charities to benefit are to be chosen at the absolute discretion of my executors", would/should the charities chosen still demand their share of net income and gains?

Would charities chosen this way still have the right to see the estate accounts?

[swill453]

How does that fit into listing charites in the letter of wishes? eg if the Will said something like "I leave 10% of my net estate to charity. The charities to benefit are to be chosen at the absolute discretion of my executors", would/should the charities chosen still demand their share of net income and gains?

Would charities chosen this way still have the right to see the estate accounts?

How would the charity even know it was a legacy? Unless you told them, but why would you?

Scott.

[hiriskpaul]

How does that fit into listing charites in the letter of wishes? eg if the Will said something like "I leave 10% of my net estate to charity. The charities to benefit are to be chosen at the absolute discretion of my executors", would/should the charities chosen still demand their share of net income and gains?

Would charities chosen this way still have the right to see the estate accounts?

How would the charity even know it was a legacy? Unless you told them, but why would you?

Scott.

Good questions!

Would the charities not need to know the source of a large sum of money? Money laundering for example?

What steps, if any, do HMRC take to ensure that the charities listed in the IHT400 actually receive their money?

[mc2fool]

Ok, some interesting nuances, both re stapling (will paper clipping do? ) and wording in the will, there that I'll leave to legal beagles to comment on.

I have been told not to do that, but I don't know the precise reasons. If something is attached to the Will I am fairly confident that you must not remove it before sending it to the Probate office.

Ok, then maybe just put them in the same envelope. Separate legally but together physically, just for the pure practicality of them not getting separated and the letter misplaced and lost. Although I suppose if you file them with a local solicitor you should be able to trust that won't happen. AIUI another advantage of the letter of wishes is that you can simply issue a new one at any time without the legal faff of changing your will (no witnesses needed, etc), so if you change your mind about which charities you want your 10% to go to it's easy to update it.

Re your final sentence, my understanding (also from reading these boards) is that the bigger charities have people that go through wills when they're published (which is after a grant of probate is issued) looking for bequests to them and, in particular when there are residuary bequests, then might start hassling the executors. Whether they will do so if they aren't actually named in the will I don't know but I haven't heard of any cases like that....

Ok, so the charities might start hassling PRs before the PRs want them to if specifically named in the Will. That makes a lot of sense.

What I am more concerned about is that charities made residuary beneficiaries have stronger legal rights to question things than they would if they were given a fixed sum of money, or a specific asset. In fairness, I can see that charities may feel it is their duty to make sure that the estate is properly managed and they get what they are entitled to. Some way of avoiding extra hassle, whilst also allowing the executors to give precisely 10% to charity as per the deceased's wishes and without having to use an instrument of variation would be good.

Well, yes, that was the major hassle I was thinking of. There has to be some phrasing of the will that'll avoid that, be it in conjunction with a letter of wishes, or maybe a trust?

[hiriskpaul]

Very interesting page from the tax manual

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