Purely Academic: Few leave money to charity, so this area is worthy of investment

There is still much to learn about charitable bequeathing, but it seems fertile ground for charities, writes Peter Backus

Peter Backus
Peter Backus

Bequests are a major source of income for charities, bringing in £2.2bn in 2013/14. Governments encourage charitable giving, and understanding it is of considerable policy relevance. But data on bequeathing behaviour is hard to come by. Most studies are of the very largest estates, which make up only a small percentage of the total.

Professors Tony Atkinson, John Micklewright and I have written a paper, Charitable Bequests and Wealth at Death, soon to be published in The Economic Journal, using data from every estate that went through probate in a 12-month period. Our analysis has led to some interesting results.

First, only 16 per cent of estates include a charitable bequest. This rises with the size of the estate - from 10 per cent for the smallest estates to 50 per cent for those worth more than £3m. But even among the very wealthy, charitable bequeathing is not pervasive. Taken together, this suggests that the sum of funds flowing to the sector in the form of legacies is from a rather small minority of decedents each year.

Second, we study the impact of inheritance tax. Because charitable bequests are exempt from this, people have an incentive to leave money to charity. This is a tricky thing to study, but we do find evidence that inheritance tax has a small but measurable impact on the likelihood that someone makes a bequest.

Last, we find that charity preferences can vary with income. For example, 25 per cent of smaller estates (less than £40,000) that leave a bequest choose one of the many animal charities. Larger estates of more than £500,000 are nearly five times more likely to favour an education charity (9 per cent) than smaller estates (2 per cent).

There is still a great deal to learn about charitable bequeathing, but one major take-away is that it seems fertile ground for more investment from charities, because most people currently do not leave anything to charity at all.

Peter Backus is a lecturer in economics at the School of Social Sciences, University of Manchester

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