New study by Rathbones reveals increased desire for legacy giving.
Complex red tape is deterring many wealthy families from leaving money to charities in their will, despite anincreasing desire to do so, according to a new study.
The research from Rathbones, a UK-based wealth manager, found widespread concerns facing families who are keen to leave gifts in their will.
A survey of high-net-worth families with average wealth exceeding £3million found that more than two in five (42%) say legal and financial complexity is the main challenge preventing them from including charitable giving in their estate plans.
Almost as many (39%) cite a lack of knowledge about non-profit options, while over a quarter (26%) admit they are unsure where to begin.
Rathbones claim high net worth individuals face various bureaucracy when giving to charity in the UK, including tax considerations, correctly structuring donations and foundations, ensuring governance and compliance adheres to charity law as well as balancing philanthropic goals with family inheritance and legacy planning.
These hurdles could be thwarting strong philanthropic intentions, according to the study.
53% of those surveyed have increased charitable donations in the past two years, with two-thirds (66%) expecting to give more in the next two. Almost two-thirds (62%) have included a charitable gift in their will – averaging £233,000 – and 83% of those without a will intend to write one within three years including a charitable gift.
The wealth managers said this can also be highly tax-efficient. If at least 10% of a net estate is donated to charity, the inheritance tax (IHT) rate on the rest falls from 40% to 36%. Yet a fifth of wealthy families surveyed were unaware charitable donations can be used in estate planning to reduce IHT. Once aware, 84% would consider leaving 10% of their estate to charity.
Seven in ten wealthy families studied said they expect to speak to their financial adviser about charitable giving in the next five years, compared to just over half (51%) who have already done so. Similar trends are seen with lawyers (48% plan to in the next five years vs 22% already) and accountants (21% vs 14%).
Wealthy individuals are also planning to leave non-cash assets to charity – such as property, investments or valuable personal items – which are exempt from IHT and excluded from the estate valuation. One in ten (10%) have already planned such gifts, with a further 82% likely to do so.
Gemma Gooch, head of charities distribution at Rathbones, says: "The charity sector is facing a perfect storm: rising demand for services, economic uncertainty, and intense competition for donations.
“Legacy giving is a vital lifeline for charities, yet our study shows many high-net-worth individuals are held back by complexity and a lack of guidance. By making it easier for donors to integrate philanthropy into their estate planning, we can help secure long-term funding for the causes that sustain our communities."
To facilitate charitable giving, Rathbones is launching its Donor Advised Funds (DAF), a flexible, tax-efficient solution that enables clients to donate and support causes they care about.
Donations to the DAF are eligible for immediate tax relief and can be invested to grow tax-free. Family members can also be nominated as successor advisers to continue the donor’s legacy.
Rebecca Williams, financial planner at Rathbones, said: “We’re seeing more families recognising that with the right advice, they can reduce their tax exposure, protect their loved ones, and make a meaningful difference to the causes they care about. The challenge is that too many still feel uncertain about how to start. Professional guidance is essential, to turn good intentions into effective, lasting legacies."
