Where part or all of an estate is to pass to charity, there can be benefits to doing so through a trust.

What are the advantages of benefiting a charity in a Will?

The main advantages of benefiting a charity in a Will are:

• The ability to benefit good causes; and
• Gifts to charity are Inheritance Tax (IHT) free, and if 10% of the net estate passes to charity then IHT is paid on the remainder of the estate at the rate of 36% instead of 40%.

What is a Charitable Trust?

Whilst it is entirely possible to name specific charities as beneficiaries within a Will, an alternative is to provide for the charitable gift to pass to a Charitable Trust. A Charitable Trust is a trust where the trustees can only use income or capital to benefit charities or charitable purposes. The Will is coupled with a Letter of Wishes which tells the charitable trustees which charities or charitable purposes to benefit.

What are the advantages of a Charitable Trust?

A Charitable Trust gives the flexibility to name a single or multiple charities or charitable purposes within the Letter of Wishes, and then update that Letter of Wishes as time passes without needing to amend the Will.

The Charitable Trust also provides the flexibility to set out within the Letter of Wishes how the charitable gift will ultimately be used; for example, benefiting a local branch of a national charity, which would not be possible within a Will.

The Charitable Trust can also make administering the estate a simpler process. If a specific charity beneficiary is named in a Will, the role of the charity’s legacy officer is to optimise the benefit from that gift. Whilst this is entirely justifiable, it can result in delays and increased costs in the estate; for example, the legacy officer may well want to be involved in the marketing of any property, and want regular updates and detailed information during the administration of the estate.

Is there any disadvantage to a Charitable Trust?

A Charitable Trust Will can look complicated. However, it can actually make administering the estate a simpler process.

What are charitable purposes?

If charitable purposes, rather than specific charities, are set out in the Letter of Wishes, they must be for the:

• Prevention or relief of poverty;
• Advancement of animal welfare;
• Advancement of health or the saving of lives;
• Relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;
• Advancement of education or religion;
• Advancement of citizenship or community development, or environmental protection or improvement;
• Advancement of the arts, culture, heritage, science or amateur sport;
• Advancement of human rights, conflict resolution, religious or racial harmony, or equality and diversity;
• Promotion of the armed forces, the police, fire and rescue services or ambulance services; or
• Any new charitable purposes recognised in the future.

How is a Charitable Trust administered?

The charitable trustees distribute the assets in accordance with the Letter of Wishes; do not need to register the Charitable Trust with the Charity Commission (unless its annual income exceeds £5,000); and cannot benefit from their role unless expressly authorised by the Will.