Gifts in wills are under threat from new fiscal developments – which is why working with the legal sector has never been more important, says Rob Cope
Everyone has a different take on what the future holds for fundraising, but if one thing is for sure, it’s that legacies will become increasingly important to the sector. It’s a rapidly growing market that already brings in over £2.5bn annually – according to the latest Smee and Ford Legacy Trends update, 23,000 charities have been named in wills since 2012 – and the potential is so much larger than that. However, continued growth relies heavily on the legal sector and its role advising clients about the option of including a charity in their will.
Closing the gap
We know that just a fraction of people that would like to leave a gift in their will go ahead and do it. Our research shows that 35% of people say they’d be happy to leave a gift in their will and yet only around 6% currently do. While there is much that we are doing to work collaboratively, creating a strong sector voice and building awareness of legacy giving, I believe that solicitors and will writers are a key factor in closing that gap.
Charities aren’t always front of mind when people plan their estates; they want to make sure that their families and loved ones are taken care of and don’t always realise that they can still include a gift, or how to go about it. So, when professional advisers remind clients about the option of charitable giving, they can dramatically increase the number of people who go on to make a legacy donation.
Whether or not they talk about charitable bequests and how they reference legacy giving can make a striking difference to the number of people that give, potentially trebling the number of charitable wills.
Making charity a regular part of will writing conversations
There are many ways that legal professionals might refer to legacy giving during the will planning process, and inheritance tax incentives (which reduce the amount of tax payable on donors’ estates) are often an important factor.
It’s certainly a positive message for supporters, encouraging people to give – particularly around the point of the tax threshold. While it’s not a reason to give on its own – that drive will likely come from the individual’s connection with the cause – it can be an influencing factor in the decision to give or around how much to give.
But, the real crux of the matter is that the tax breaks are a natural entry point for professional advisers to raise the topic and those conversations are key to growing legacy giving.
The great news is that record numbers of advisers are now talking about the tax advantages of legacy giving with clients. Our solicitor tracking study, carried out by Future Thinking, reveals that more than seven in ten (72%) solicitors and will writers always or sometimes advise clients about the inheritance tax benefits of legacy giving – up from 61% in 2009.
This is a huge step forward and, having focused on engaging the legal sector in recent years as part of our mission to make legacy giving a social norm, this is something that we’re proud of having contributed to. Advisers working with one of Remember A Charity’s 1,100 campaign supporter legal firms are more than twice as likely to always mention charity bequests. Three-quarters of advisers that worked for one of the consortium’s supporter firms always mention charitable legacies during the will writing process, compared to just a third of advisers at other firms.
Concern over the new inheritance tax framework
While great strides have been made here, there are also some worrying changes that threaten future progress. The inheritance tax framework is changing and the new main residence nil-rate allowance, introduced on 6 April 2017, means that fewer estates will be subject to IHT or can benefit from the tax incentives linked to legacy giving. There is a real risk that this might lead to fewer legacies. A worst case scenario from Prof Sarah Smith of the University of Bristol estimates that there could be 1,200 fewer people annually leaving charitable gifts as a result of the tax changes.
While we support the principle of reducing the fiscal burden on families, we are concerned that the impact on charities could be considerable. If you compound that with the massive hike in probate fees coming in this May, which charities also fear might deter people from giving, this could mean tough times for building engagement with the legal sector. But this also makes it even more important that we don’t sit idly by.
Building engagement with the legal sector
That’s why Remember A Charity recently proposed a new fiscal incentive for legacy giving: the introduction of VAT exemption on the cost of writing all wills that include a charitable gift. On the face of it, this may not seem like such a big deal, after all VAT costs on will writing are relatively small, both to individuals and to the government. Of course, this proposal isn’t so much about VAT money itself, but about giving solicitors and will writers cause to highlight the option and benefits of legacy giving to all their clients, potentially doubling (or more) the amount of people that choose to give in this way.
Now more than ever we need to work collectively to build on the momentum with the legal sector and support advisers in making charity a regular part of legacy discussions.
Rob Cope is director of Remember A Charity, a consortium of over 160 charities that works to promote legacy giving, with its annual legacy awareness week taking place 11-17 September 2017. @RememberCharity.