Tough times for the Third Sector – How can we all help?
Charities have proved to be especially vulnerable to the economic downturn and pressures associated with the Covid-19 epidemic. Many trustees are finding their cashflow is being put under significant pressure through a combination of reduced donations from the public, greater obstacles to fundraising and their investments taking a hit along with the financial markets.
The crisis has also seen charities facing mounting demands on their frontline services and, for grant making charities, a significant rise in requests for funding from other needy causes. In addition, they’re facing the challenges of losing their essential volunteers who are sheltering during lockdown, having to implement new measures to support their paid employees and also having to protect end users of their services. Charities are also having to expend yet more of their precious resources on new technology at short notice to allow them to continue operating effectively in the current environment. Good news is certainly hard to find at the moment.
So how can we help the charitable sector to weather the financial squeeze and the uncertainty that it’s currently facing? Fortunately, there are a number of options.
In the short term we can all make one off or direct-debit donations to our favourite charities: many will already be doing this and taking advantage of the Gift Aid scheme to provide their favourite charities with some financial relief. The Government has also put some financial support in place for the sector but most of these measures are only short term in nature. Thinking longer term, sustainability in the sector can be effectively supported by donors providing for their favourite charities under their Wills.
We regularly advise clients about how best to structure their charitable giving when they’re looking at their Wills, both to maximise the impact and public benefit of the donation and to secure the key tax benefits associated with this form of philanthropy.
For medium and larger sized estates which are forecast to suffer inheritance tax (IHT) it can make sense for clients to give away 10% or more of their estate to secure a beneficial lower rate of IHT on the remaining estate (36%, rather than 40%).
This useful relief was originally introduced to encourage philanthropy and is becoming a popular planning tool for clients to achieve their charitable objectives. Whilst beneficiaries of those estates do end up receiving marginally less as a result, the chosen charity benefits significantly, with HMRC being the main loser, missing out on the IHT that would otherwise have been payable. Obviously, the gifts will not be made until the donor has died, so charities won’t receive an immediate boost to their finances but knowing that they are being supported in this way will allow them to factor the expected gift into their longer term plans as they plot how to recover from the current crisis.
If you’d like to explore putting a Will in place and supporting your favourite charity in this way then please do get in touch using our Priority Wills Service here and one of our solicitors will be in touch with more details. Alternatively, if you are a charity wanting to promote this form of giving amongst your supporters then please do contact our Charities sector team here to discuss what measures you can quickly put in place to promote the regime and maximise the take-up of this beneficial option by your supporters.