Giving to Charity - Considerations for Professional Advisors
With Remember A Charity Week in mind, and Irwin Mitchell’s recent £500,000 contribution to the Irwin Mitchell Charity Foundation in August 2024, we have taken the time to consider the current status of charitable giving in the UK, and how we as advisors can continue to make an impact in the philanthropic field under the UK’s current financial climate.
As pointed out by Legacy Foresight in their Legacy Market Review 2023, legacy income is one of the largest sources of income for charities in the UK, and in the financial year 2022/23 was estimated to be worth in the region of £4 billion, arising from 140,000 bequests. With an anticipated rise in deaths, along with the increasing value of assets such as residential property, legacy income is predicted to reach over £6 billion by 2050.
Although these statistics show a positive trend in charitable giving, over the past year the philanthropic activity of our wealthiest individuals highlighted a reduction of charitable giving (either personally, through charitable foundations or business) by £200 million in comparison to the previous financial year. With charities in general facing a rise in demand for services alongside increasing costs, it is important to consider how we can best advise our clients to make a difference, whilst ensuring any giving aligns with their lifestyle and does not negatively affect their financial health.
High Net Worth Individuals
In June of this year, we discussed the importance of bridging the philanthropic knowledge gap for high-net-worth individuals (Bridging the Philanthropic Knowledge Gap for High-Net-Worth Individuals (irwinmitchell.com)) and with the above figures in mind, this now seems to be more important than ever. A prediction mentioned by Amy Blackwell, Philanthropy and impact specialist, is that 60% of UK wealth will be in the hands of women by 2030 and as such, it is important for us to consider the increasing diversity of our client base and the ways in which we can support our clients in their philanthropic activities.
The philanthropic knowledge gap is the lack of expertise amongst financial advisors to counsel their clients on giving. A strategic approach is necessary when navigating the evolving philanthropic landscape, with many high-net-worth individuals now opting to establish private foundations to accommodate their desire to engage in philanthropic activities and charitable giving. With continuing professional development to ensure advisors are well equipped to meet client needs in this regard, we can bridge the knowledge gap and make an impact in the charitable sector whilst ensuring any giving is aligned with our clients’ principles and lifestyle.
A Wider Audience
Although more affluent individuals are likely to write their Will at a younger age, as referenced in Remember A Charity’s recent tracking study (Legacies on the rise: tracking study out now – Remember A Charity), the average age when making a Will in the UK is 51 years, with key life events such as birth, death and marriage triggering an earlier desire to write a Will. It is thought that 57% of potential charitable supporters would use, or have used a solicitor to write their Will, with 17% opting to use a professional Will writer.
Free Will writing schemes such as Wills Week in February and October each year, and prompts such as Remember A Charity Week, are likely to increase enquiries, even from younger and less affluent audiences. Should those individuals be inclined to leave a legacy to a charity in their Will, this can continue to make a difference to the currently declining charitable income from Will bequests. Professional advisors, whether that be solicitors, Will writers or financial advisors, play a key part in charitable giving, and so this is a perfect opportunity to make an impact in this sector.
In addition to remembering one or more charities in their Will, it is important to remember that there can be inheritance tax benefits for our clients to consider, regardless of their wealth status. There is a specific exemption from inheritance tax when assets are left to charity, and in fact, if the testator chooses to leave a gift of 10% or more of the baseline amount of their estate to charity, their estate will benefit from a reduced inheritance tax rate of 36% from 40%.
In circumstances where our clients will be facing inheritance tax implications based on the value of their estate, this may be a desirable option which allows them to still benefit their friends and family, whilst making a difference with the charity(ies) of their choice. This is particularly relevant keeping in mind that statistics show the biggest barrier to leaving a gift in a Will is the testator’s desire to leaving everything to family of friends (as confirmed here: Legacies on the rise: tracking study out now – Remember A Charity).
If you wish to seek expert advice regarding giving to charity, or philanthropy, please get in touch with Matthew Briggs or Laura Williams. For further information visit Charity & Philanthropy Wealth Management Solicitors | Irwin Mitchell.
