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Legacy Giving - RFUK not TRF

If you leave something to charity in your will, then it won’t count towards the total taxable value of your estate. This is called leaving a ‘charitable legacy’.

You can also cut the Inheritance Tax rate on the rest of your estate from 40% to 36%, if you leave at least 10% of your ‘net estate’ to a charity.

To illustrate how this would work, let’s say that when you died:

  • your net estate was worth £425,000
  • in your will, you left it all to your partner who lives with you
  • you have your full Inheritance Tax allowance (currently £325,000 for the 2018/19 tax year)
  • you weren’t married or in a civil partnership (the spouse exemption is not available if you are not married)
  • thus, the ‘net estate’ is £100,000 (i.e. £425,000 minus £325,000). And there is Inheritance Tax to pay on £100,000 at a rate of 40%
  • so, your estate would have to pay a tax bill of £40,000 (i.e. 40% of £100,000).

But if you wanted to reduce the tax bill by making a charitable gift:

  • you’d leave your partner £415,000, and
  • £10,000 to charity in your will (which is 10% of your ‘net value’ of £100,000)
  • the estate would then pay 36% on £90,000 worth of assets instead. This means that your estate would pay £32,400 in Inheritance Tax.

While this would mean your partner receives less when you die, in this example making a charitable legacy would shave off £7,600 from the Inheritance Tax bill.

Leaving a legacy in your will can be worthwhile for your dependants, however, it is normal for a charity to decide how the gift is spent. Other charities will spend the whole sum, which means that often the gift can end up paying administration costs for the charity. However, The Rotary Foundation's Endowment Fund does not work in this way.

Firstly, you can choose to give support to any one of the six areas of focus.

Depending on the size of the gift, there are also options to be more specific on how the funds are spent.

Secondly, the capital is never spent - just the interest from the capital is directed to the programme selected.

Consequently, a legacy gift to The Rotary Foundation is invested in perpetuity, and will always be doing good in the world.

However, I’ve had recurring conversations in each district that I’ve visited, where I would be approached by individuals and told that The Rotary Foundation (TRF) was already included in their wills and had been so for some years.

The point to remember is that it has only been for the last six or seven years that Rotary Foundation of the United Kingdom (RFUK) has been specified rather than TRF.

I’ve mentioned this before, but I will repeat the fact that The Rotary Foundation is not a Registered UK Charity.

Consequently, HMRC do not recognise such a gift against Inheritance Tax relief.

Conversely, (RFUK) is registered, and it should be confirmed that an endowment is directed in the correct manner.

Steve Munns - Endowments/Major Gifts Advisor Zone 18A (courtesy of the Rotary GBI Foundation Team Newsletter - March 2019)

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