According to the latest data by the legacy research company Smee & Ford, the value of charitable legacies rose by 8 per cent in 2014 to £2.208bn, compared with £2.044bn in 2013. Crucially, the average proportion of estates left to charities also grew – up from 15.8 per cent in 2013 to 16.65 per cent in 2014.
These trends, of course, are extremely positive for charities and go some way towards demonstrating the potential of legacies as a revenue stream for charities of all sizes. Smee & Ford’s data shows that 112,937 donations were left by almost 35,000 donors in 2014 and the number of charities benefiting from donations rose by 5 per cent to 2,257.
It is very difficult to attribute specific growth to any individual reason, but charitable legacies have undoubtedly soared since the introduction of inheritance tax relief, introduced by the coalition government in 2012. This enables executors to pay a reduced rate of inheritance tax – 36 per cent instead of 40 per cent – if 10 per cent or more of the estate is left to a charity.
For any charity to benefit from this growth, it must have the correct processes, systems and infrastructure in place. Smee & Ford reports that just over 2,200 charities benefited from legacies in 2014, but this is only a fraction of the 165,000 registered charities in England & Wales.
Clearly the larger organisations do well from legacies, with bigger marketing budgets, greater resources and nationwide recognition. It is not an exaggeration to say that national charities currently monopolise legacies.
Regional charities won’t have this same clout, of course, but there is still plenty that can be done to encourage legacy donations from your supporters and get a bigger slice of the legacy pie.
If you don’t already have one in place, a comprehensive legacy policy is a must. There is some excellent guidance on the Gov.UK website, including links to the Institute of Fundraising covering ethical considerations, how to communicate with the public and special groups for sharing ideas.
Above all else, make use of all marketing channels: make sure legacies are promoted on your website, in newsletters and any other written communication, because supporters might not even be aware of the issue, let alone the potential tax benefits introduced in 2012.
Controversy and ethics
Legacies can be an extremely sensitive subject and we are all aware of the controversy over charities "chasing" bereaved relatives for gifts.
However, it should not put any charity off. With a £2bn pot available from almost 35,000 charity supporters, legacies continue to be an extremely valuable source of income for charities. And with evidence to show that the legacy pot is growing – together with the legacies themselves as a percentage of estate – the opportunities will continue to grow.
Don’t be afraid to engage with your supporters in a sensitive and caring manner; it might even reduce their family’s inheritance tax liabilities – a "win-win" situation.
Nigel Shaw is CSR partner at the accountancy firm Garbutt + Elliott