Leaving gifts in Wills

Posted on August 21, 2024

When planning your estate one of the most meaningful ways to leave a legacy is by making gifts in your Will and whether they are to family members, friends, or charitable organisations, they allow you to ensure that your assets are distributed according to your wishes.

What are gifts in a Will?

A gift in a Will is a specific bequest where you leave a particular item, amount of money, or share of your estate to a named beneficiary. These gifts can be anything from personal belongings and property to cash donations and investments.

“When making a Will it’s always beneficial to chat with your legal representative about gifts, how to make them, what they entail and the specific and varying types of gifts, only then can you ensure your intentions are clearly understood and legally binding,” said Lucy Roughley, legal adviser in our Private Client department.

Types of gifts in Wills

Pecuniary Gift: Are specific sums of money left to a beneficiary. For example, you might leave £10,000 to a friend or relative.
Residuary Gift: This involves leaving a percentage, share, fraction or remainder of your estate to named person or people after all other debts, expenses, and specific gifts have been distributed. For example, you might leave 50% of your remaining estate to a charity and the remaining 50% between your relatives.
Contingent Gift: These gifts depend on certain conditions being met, such as a beneficiary reaching a certain age or graduating from university.
Trusts: Trusts are used for different reasons. A trust is likely to be beneficial to you if you are a parent of a child under the age of 18, or if your child has health problems or is otherwise vulnerable (addictions, manipulation from a third party, etc.). Trusts can also be used to allow a cohabitee or other person the right to remain living in your home for a period of time, with the house itself passing to somebody else eventually. Trusts also allow you to maximise your inheritance tax allowances and protect assets where possible for your family, so not everything is lost to care fees in the future.

How to leave a gift in your will

It’s a good idea to identify your assets and make a comprehensive list, including things such as sentimental items, artwork, family heirlooms, property, savings, investments, and personal belongings.

Choose your beneficiaries and decide who you want to receive your assets. This can include family members and particular friends, other individuals, groups, or organisations such as charities.

Then you need to determine the type of gift you want to leave each beneficiary. This could be a specific item, a sum of money, or a percentage of your estate as noted above.

Finally, it’s important to work with a solicitor to ensure your Will is legally valid and accurately reflects your wishes. A solicitor can guide on the implications of different types of gifts and help draft clear and unambiguous terms.

They will also advise you to include alternate beneficiaries, this is just in case a chosen beneficiary predeceases you, or is unable to accept the gift, by naming alternate beneficiaries you ensure your assets are distributed as intended.

“We always advise clients to make sure they regularly review their Wills as life circumstances change and so again gifts in Wills often need to be reviewed,” said Lucy.

“A Will review and updates to a Will reflect significant life events such as marriages, births, divorces, or the acquisition of new assets.”

“I often tell my clients that a gift gives them peace of mind and control over asset distribution, they can provide financial support to loved ones, as well as contribute to causes and charities they care about, thereby leaving a lasting impact,” said Lucy.

Are gifts in a Will subject to inheritance tax?

There are tax benefits as charitable gifts in your Will can reduce the Inheritance Tax on your estate, providing potential tax benefits for your beneficiaries.

Your beneficiaries may have related taxes to pay, for example if they get rental income from a house left to them in a Will.

However, if you die within 7 years of gifting the asset, then the gift will count towards your nil-rate band, meaning that it may still be subject to IHT. After 7 years, the gift doesn't count towards the overall value of your estate. This is known as the 7 year gift rule in inheritance tax.

Leaving a gift in your will to charity

Many people are touched by the good work done by charities, or have a particular cause they support. You can make provision for them in your Will by considering a gift of money, specific items, or include them as a residuary (or ultimate residuary) beneficiary.

Gifts to UK registered charities are tax exempt and do not reduce your general nil-rate band.

Common Considerations when leaving Gifts in Wills

Clarity is Key: Be as specific as possible in describing the gifts and beneficiaries to avoid confusion and potential disputes.
Discuss Your Wishes: Consider discussing your wishes with your beneficiaries to ensure they understand and are prepared for the responsibilities of receiving your gifts.
Consider Professional Valuation: For significant or complex assets, obtaining a professional valuation can ensure fair and accurate distribution.
Address Digital Assets: This is something we always remind clients about as many people do not consider them. Don’t forget to include instructions for digital assets, such as online accounts and digital files, in your Will.

“Making gifts in your Will is a powerful way to ensure your legacy lives on, providing for loved ones and supporting causes that matter to you. By carefully planning and documenting your wishes, you can create a lasting impact and bring peace of mind to yourself and your beneficiaries,” added Lucy.

How can we help?

For legal advice on making a Will or to talk about reviewing your Will contact our Private Client department on 0161 785 3500 or enquiries@pearsonlegal.co.uk

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.