Yahoo News Estate Planning Philanthropy: How to leave a lasting legacy
By Alexis Graham, Partner, Shepherd and Wedderburn
SCOTLAND has always had a proud history of philanthropy and a strong sense of community.
From wealthy industrialists such as Andrew Carnegie, who established the Carnegie Trust and numerous libraries across the world to Sir William Burrell, who donated the vast majority of his impressive art collection to the City of Glasgow which can still be enjoyed today.
Society has of course evolved since then and the needs of its citizens have evolved in tandem, but the proud history continues through modern-day philanthropists.
Many members of the Scottish business community have openly committed a significant proportion of their wealth to philanthropic endeavours including well-known public figures such as Judy Murray.
Elsewhere, many more private family charities have been quietly established by non-household names anonymously and without fanfare.
According to the Charities Aid Foundation, in 2023 UK charitable giving exceeded £13 billion.
This is something we should rightly be proud of and support where possible through our own personal charitable giving and endeavours.
Whilst I have never met a philanthropist who is principally motivated by tax, it is important to remember that the Government has put in place various incentives such as the Gift Aid Scheme for donations made during your lifetime, which allows UK charities to reclaim an extra 25% in tax on every eligible donation.
For example, if an individual makes a donation of £100, Gift Aid enables the charity to receive £125 and if you are a higher rate taxpayer, you can also claim back the difference between the tax you’ve paid on the donation and what the charity reclaimed.
Donations can also be made through an individual’s will and a reduced rate of Inheritance Tax applies (36% rather than 40%) when more than 10% of an individual’s estate is left to a UK-registered charity. Additionally, any legacies left to a UK-registered charity are themselves fully exempt from Inheritance Tax.
These allowances operate to encourage charitable giving while increasing the amount a charity receives. In our experience, some clients are put off making donations or legacies in their Wills as they are unsure of who to give funds to and nervous about the need to potentially update their Will if the charity merges or is dissolved.
With careful drafting, this should never be a problem, but it is also worth remembering that it is possible to create a donor-managed fund where you can retain control or donate to a body which will apply the funds flexibly such as the Charities Aid Foundation.
Other clients who might be tempted to establish their own charity are put off by the regulatory requirements and/or a perceived administrative burden. While private charities do indeed come with a degree of regulation, with good advice this is perfectly manageable and enables you to control your giving and make a meaningful difference to causes you are genuinely passionate about.
Alexis Graham is a member of the private wealth and tax team, and has a particular expertise in charity law. She advises high net worth individuals in all aspects of personal estate planning, including wills, powers of attorney, trust formation and administration, succession planning and charity formation. She also advises charity trustees on the ongoing administration of charitable organisations, including compliance/regulation and mergers/amalgamations
