With 75 per cent of charities anticipating higher demand for their services in 2021*, maximising your charitable donations is more important than ever. Here are three questions to consider to help your donations go further.
2. When do you want to donate?
Deciding whether you want to donate during your lifetime or after death will have implications for tax and wealth planning, which may influence decisions on maximising the amount gifted.
In the examples above, clearly donating through payroll giving and donating a cultural object will need to occur during your lifetime. Donations of money or assets, however, can form part of your will and inheritance planning.
Bequests made to a charitable cause in your will not only reduce the value of your estate when determining the inheritance tax (IHT) liability, they can also have the effect of reducing the rate of inheritance tax payable on the remaining estate. For example, gifting more than 10 per cent of your estate to charity means, firstly that the donation to the charity is not subject to IHT, and secondly that the remainder of the estate not passed to charity is taxed at the reduced IHT rate of 36 per cent.
3. How do you want to give?
Depending on the answers to the above questions, the amount and frequency you want to donate, what your aims and motivations for giving are and how hands on you want to be, there are a range of mechanisms for giving. These range from making a straightforward gift of cash or assets, or a bequest in your will, to setting up your own foundation or channelling your donations through a Donor Advised Funds account.
At a time when the need is so great, finding the best way to make a difference can feel overwhelming, but by taking the time to discuss your plans and options with your Relationship Manager or Wealth Planning Advisor, as well as with your Tax and Accountancy team, you can find a solution that optimises your donation and ensures that your money goes further.
* Charity Finance Group, Economists sound warning over 'charity crunch', November 2020