Generally, the UK’s high net worth individuals (HNWIs) have investable assets of over £1million or annual income of over £300,000.
These are the people we would once have called ‘millionaires’, which certainly excludes most of us. However, it’s estimated there are over 3million in the UK.
Charitable donations
According to recent research half of these millionaires included a charitable gift in their Will. Around a third use charitable Will Trusts and Donor Advised Funds (DAF)*. The figure rises to three-quarters for people with estates over £5million.
Well over half of those who haven’t yet included a charitable legacy in their Will say they would consider it. A quarter simply hadn’t thought about it before. Surprisingly, a fifth of HNWIs don’t have a Will and say they don’t intend to write one.
The research found that many HNWIs plan to leave a percentage of their estate to charity. Even more might do so, given the tax benefits. Tax-free charitable gifts amounting to over 10% of the estate can reduce Inheritance Tax from 40% to 36%. The government provides an online calculator for charitable giving from estates of people who died after 6th April 2012.
Providing for children
HNWIs who don’t have children indicated they’re twice as likely to leave charitable gifts, compared with those who have children. However, even those with children felt they could look after their family and support charitable causes.
HNWIs can also leave non-cash assets to charity including property, investments or valuable personal items. These can be excluded for IHT purposes and estate valuations.
Barriers to charitable donations
Many people feel leaving money to charities is too complex, deterring them from taking this step. Almost as many say they don’t know enough about the options available or how to start.
It can be challenging to create the right structure for charitable gifts and the correct governance to meet charity laws. However, as charities face falling donations due to the cost of living, these gifts could make an important difference.
The number of wealthy people planning to take advice in the next five years is increasing. Around seven out of 10 families now say they will do so, compared with half who have already done so.
*Donor Advised Funds (DAF). A DAF is a flexible, tax-efficient option that helps people make donations to support their favourite causes. Donations attract immediate tax relief and investment growth is tax-free. Family members can remain as advisors to continue their loved one’s legacy.
Of course, you don’t have to be a millionaire to make a donation to a charity in your Will.
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