The Act of Giving Has Practical and Emotional Considerations – Andrew Paterson
The charitable sector has been devastated by the turmoil surrounding people’s personal finances and their ability and even the opportunity to give. The leave may have saved many desperate money worries, but the true impact of the pandemic won’t be realized until everyone is once again financially self-sufficient.
Certainly, the impact on fundraising is going to have far-reaching repercussions. The current position can focus minds on how best to donate, both during your lifetime and through your will.
Cancer Research UK has highlighted figures from the Institute of Public Policy Research, showing that the UK could lose nearly £ 8 billion in investment in life-saving research by 2027, mainly due to the loss of charitable income. The impact on small charities is colossal and estimates suggest that 40 percent of UK charities only have six months of reserves, and nine percent have no or no cash reserves. enough to last a month.
This puts more emphasis on the emotional and rational reasons behind charitable giving. Obviously, there are altruistic reasons to be given, but there are also practical considerations – in its simplest form, tax planning.
As always, in tax matters nothing is easy and expert advice is needed to ensure that your wishes and desired results are achieved. We’ll all be used to ticking the Gift Aid box as we’re sponsoring friends and family to allow charities to recoup tax on donations, but charitable giving and planning is considerably more complicated.
A practical issue revolves around inheritance tax (IHT) and carefully planned giving can reduce or even eliminate your IHT liability. Any donation to charity is not part of the assessed value of your estate and if you leave 10% or more of your net estate to charity, the IHT rate on the remainder of your estate (if you are still liable) decreases from 40 to 36 percent.
There are many ways to do this, and your will needs a clear purpose to make sure your wishes are met. It is also worth remembering the issue of legal rights, which affects what is classified as ‘movable property’ in Scotland and includes bank accounts, stock portfolios, cars, furniture, jewelry and more. This provides protection from the disinherited to a spouse, civil partner and children so that charitable donation intentions can be challenged. A deprived spouse / civil partner or children (natural or adopted, but not stepchildren) have the right to claim a third or half of the movable property depending on who survives the deceased. The best-conceived plans for charitable giving could be thwarted.
Rational considerations also come into play for lifetime donations, as relief is available on both income tax and capital gains tax. The emotional act, figuratively speaking, of putting your hand in your pocket can have some very practical benefits. It is important to balance the reasons and the benefits of any donation.
I suspect that few professional counselors would repeat Mother Theresa’s advice to “give until it hurts”, but they have a duty to make sure that you are aware of the tax implications and the benefits of giving. Many small charities can survive because of this.