Living Legacies – Death by Omission?

26 May 2011 | By Cause4 staff

Whilst applauding the government’s recognition of legacy giving, expressed through recent measures in the 2011 budget when it was announced that inheritance tax on estates leaving more than 10% to charity would be reduced to 36%, Cause4 is slightly surprised that the recent Government White Paper on Giving omits reference to Living Legacies – one of the hallmarks of US giving.

Legacies generate vast sums of money for charities. Cancer Research, for instance, receives around half of its voluntary donations from legacies. Yet in considering current demographics, we cannot but avoid the fact that people are living longer. Average life expectancy in the UK is eight years higher than in the 1970’s (80 as opposed to 72). This is creating a far longer delay between the time a decision to leave a legacy and the charity’s receiving the donation on the demise of a donor. Substantial sums of money intended for charitable purposes are unavailable for charitable purposes for far longer.

Many UK charities have been suggesting that Government introduce tax-relief to promote ‘Lifetime Legacies’. The ideas underpinning this are ones which Cause4 applauds - encouraging donors to give whilst alive, boosting philanthropy and, in so doing, offering donors the satisfaction of seeing what their support is enabling in the here and now and giving them opportunities to feel directly engaged in good causes while they have life and breath.

At Cause4’s Philanthropy Seminar in November 2010, we highlighted the work being undertaken by the European Association for Philanthropy and Giving (EAPG), the Charities Aid Foundation and the Charity Tax Group to encourage donors to engage with charities by pledging a legacy, whilst cajoling Government to create tax-breaks available during their lifetime. Such a mechanism would create greater tax-exemption and flexibility in asset management for the donor. In other words, the charity receives a clear, irrevocable commitment from the philanthropist, as well as the eventual receipt of a lump sum from his or her estate. Meanwhile, the philanthropist receives a guaranteed income from the asset.

However, Cause4 would take these proposals several steps further. We suppose that ways can be found for advancing a legacy gift and releasing capital directly to beneficiary charities will before death and final settlement of the estate – perhaps, for example, at the age of 70 when on average a donor would live for a further ten years. We imagine that there are banks that could be persuaded to facilitate such a scheme and argue that this would encourage many more active relationships between donors and charities, something which is crucial in building an active culture of philanthropy in the UK.

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