Leaving percentage of estate to registered charities vs lump sums

theoretica

I can't remember the exact wording, but charities have a legal requirement to act towards their charitable aims.  Which means if they are getting half the estate they can't say 'OK' when they think a £1 million house is being bought by a grandchild for £100k...  I am sure some charities have been over demanding, but I am also sure some families and executors have tried to take advantage.  Appointing a professional executor or encouraging the executor to employ assistance would mean that a friend or relative wasn't subject to such stress, and the charities would have everything documented by the book.

Savvy_Sue

theoretica said:

I can't remember the exact wording, but charities have a legal requirement to act towards their charitable aims.  Which means if they are getting half the estate they can't say 'OK' when they think a £1 million house is being bought by a grandchild for £100k...  I am sure some charities have been over demanding, but I am also sure some families and executors have tried to take advantage.  Appointing a professional executor or encouraging the executor to employ assistance would mean that a friend or relative wasn't subject to such stress, and the charities would have everything documented by the book.

This: a charity's trustees have to act in the charity's best interests, and that would include pursuing an executor who was playing fast and loose with bequests to charities.

Having said that, I'd say this is more likely to happen with the large nationals who subscribe to services which pick up on such bequests. I used to work for a local charity: we did receive bequests but the arrival of the cheque was usually the first we knew about it.

Do make sure provision is made for the situation where a charity has changed name, merged or stopped operating.

pjs493

Spendless said:

If you leave the charity  a fixed amount of say £5,000 and then your estate gets reduced to very little (say you have to spend several years in a care home -my Nan spent 8 years in one) and after your funeral and any debts are paid and you're left with £6K and the wording of the will says '£5K to go to charity X and the rest divided between my children' then charity gets £5K and the children get £1k divided between them.

I would query this scenario back to the solicitor and see what they say.

But on the flip side, say someone writes there Will now in their 20s and never gets around to updating it over the years and then dies in their 80s. A legacy of £1000 now will look very different to what £1000 will be worth in 60 years time. The person in their 20s may also leave a donation based on what they feel is a fair amount based on the value of their estate at the time, but then might accumulate wealth over the rest of their lifetime. Meaning that what was once a generous gift seems tiny 60 years down the line. 

Obviously, the ideal thing is to update a Will frequently, but many people never get around to doing it. Some people never get around to writing one at all. My husband and I wrote mirror Wills when we got engaged in contemplation of our marriage. We each had numerous contingencies for failed gifts. In our case, we left everything to each other and then to our (at that time yet to be born children), then niblings, and so on. When we had children, many of the contingencies seemed redundant and we changed our minds as to who we wanted to take care of our children if we both died together in an accident. We never got around to updating our Wills so that Will written when we got engaged still stood when my husband died. If I'd died at the same time as him (or within 28 days) our children would have ended up living with people we didn't actually want to have looking after our children.

Following my husband's death, I wrote a new Will and at least six people in my family have updated theirs since too. The sudden and unexpected death of my husband spurred people on to update their Wills. When two of my grandparents died in the 00s, the Wills they had were written back to the 1970s when their youngest child had only just reached the age of 18 and they didn't yet have grandchildren. They left everything to each other and then to their children, but it does make me wonder if they would have done things slightly differently or named specific pieces of furniture or jewellery if they'd had more recent Wills before they died. They'd accumulated a lot of wealth 30-40 years between writing their last Wills and their respective deaths. 

Comparatively, an elderly aunt who also died in the 00s as a widow with no children, had quite a detailed Will listing lots of different objects ranging from ornaments, furniture, jewellery, and specific monetary gifts as well as percentages of the residue of the estate to be divided between several people. It's not known whether the specific monetary gifts were meant to make sure those in receipt of them were left comfortable, or whether it was intended to leave them significantly less than those who received a share of the residual estate. The specified figures were worth considerably more in real terms when the Will was written than when the aunt died.

aroominyork

This is a very helpful thread because we are seeing a solicitor next week to update our wills and we plan to seek advice about leaving 10% of our net estate to charity, accessing the reduced 36% IHT rate. These warnings about litigious charities are therefore useful.

If everything is left to our two children (from the second of us to die, the first leaving everything to the surviving spouse) and a letter of wishes is enclosed with the will for a donation of 10% of the net estate to be given to charity if the estate is over £xxxx, could a deed of variation be drawn up so the reduced 36% IHT rate was accessed? 

However, that would not get around the problem of litigious charities, would it?

Another angle: we plan to ask the solicitor if it can be left to our children to choose the beneficiary charity/ies when we pop our clogs. Could they require a letter from their preferred charity/ies stating they would not challenge the amount distributed, before making a firm decision about who to support?

Also, if the two beneficiary children are also the executors, what happens if one wants to abide by the letter of wishes and the other does not?

poseidon1

aroominyork said:

This is a very helpful thread because we are seeing a solicitor next week to update our wills and we plan to seek advice about leaving 10% of our net estate to charity, accessing the reduced 36% IHT rate. These warnings about litigious charities are therefore useful.

If everything is left to our two children (from the second of us to die, the first leaving everything to the surviving spouse) and a letter of wishes is enclosed with the will for a donation of 10% of the net estate to begiven to charity if the estate is over £xxxx, could a deed of variation be drawn up so the reduced 36% IHT rate was accessed? 

However, that would not get around the problem of litigious charities, would it?

Another angle: we plan to ask the solicitor if it can be left to our children to choose the beneficiary charity/ies when we pop our clogs. Could they require a letter from their preferred charity/ies stating they would not challenge the amount distributed, before making a firm decision about who to support?

Also, if the two beneficiary children are also the executors, what happens if one wants to abide by the letter of wishes and the other does not?

From a past thread you posted,  you have the additional complication that one of your proposed executors (your  son) is non UK based and apparently likely to remain outside the UK for the foreseeable future.

That being the case, and bearing in mind the awkward  logistics of having a non UK resident as executor of a UK will, there is a chance your son may agree ( when the time comes) to step back via the power reserve  system and permit his (presumably) UK based sister to administer your estate alone - see below

https://www.jordanssolicitors.co.uk/insights/wills-trusts-and-probate/understanding-power-reserved-in-the-role-of-executor

Given your children's respective circumstances, are you going to sound them out on your estate plans prior to finalising your will, to ensure everyone are on the same page with regard to your intentions?

Finally, I believe you have a Sipp so with that becoming potentially subject to IHT in the near future, you may want to explore with the solicitor the practicalities of how  ( if at all) to adjust your proposed 10% gifts to charities, to compensate for the new IHT burden your estate may face in future. For example, Should the 10% include the remnants of your Sipp, if so should you name the charity on the expression of wish ? An example of the  kind of potential complexities which may prove a bit of burden to unravel for your executor/s.

aroominyork

Thanks poseidon1. We hadn't thought about complications of him living abroad. We'll cover that with the lawyer next week. We are discussing each detail with our kids as we go along. 

Re. the SIPP, presumably it would be lumped in with all other assets for calculating the net estate? From my perspective it doesn't affect the 10% charity issue; I see SIPPs being subject to IHT as correctly closing a loophole, one that hopefully I will not be crawling through before 2027!