Deciding how our wealth will be distributed after we’re gone can be a difficult subject to approach and discuss, for ourselves and for those close to us. However, there comes a time in everyone’s life that we stop to consider what we have achieved and the legacy we will leave to the people or causes that are important to us. 

Passing wealth to loved ones

Inheritances often raise issues around fairness and equality and, for those with significant personal wealth, there is an ever greater focus on how this is achieved. For some, it is a straightforward process of dividing their wealth between children, grandchildren, and friends. However, there is a growing number of people for whom the traditional options are not suitable. 

You may have heard the saying, “where there’s a will, there’s a relative.” But this is not always the case. Sadly, in a world where social distancing and restricted interaction have become commonplace, millions of people have been left isolated. Plus, many more individuals grow old perfectly happily among their peers but have no younger friends and relatives to leave their estate to. 

Passing wealth to charity

One other option is to pass on your wealth to a charity of your choice. However, many large charities have, in recent years, been subject to criticism around managing their costs effectively, executive pay levels, and the long-term sustainability of their services.

So, what is the solution for those who don’t wish to leave all of their estate to family or friends but also don’t wish to gift it to a large charity? Allow me to introduce you to the concept of charitable trusts through a real-life case study.  

A charitable trust case study

Mrs Barns was married for over 50 years to her husband and lived in rural Dorset.  They had no children of their own, but very much enjoyed the company of those younger than themselves. In 2016, Mr Barns sadly passed away, leaving his assets to his wife. 

Mrs Barns explained to me that, whilst she still has many friends, most are of a similar age and would not truly benefit from her gifting them money in her will. She is conscious that, in a short time, they too might be passing, and her money would the end up in the hands of people she doesn’t know. She is also keen for her family name to live on. 

After a long discussion with me about various options, she decided to establish the ‘Barns Family Charitable Trust’ that would take effect from the date of her death. This gave her the confidence that she will retain the funds that she might need in her lifetime but also benefit others for many years after she has gone. 

Her intention is for the charity to provide support for children who are seriously ill, families who are affected by bereavement of a sibling or child, and families and young people in the poorest communities.  

The charitable trust will continue to gift after Mrs Barns’ death through the establishment of a charitable trust investment portfolio. Any assets she leaves to her new charitable trust will be free of inheritance tax, so the full benefit passes to her chosen cause, rather than up to 40% going to HMRC. 

Mrs Barns has appointed younger friends to act as trustees and give from the trust in line with her wishes and the charity’s objectives. A combination of income and capital from her investment portfolio will continue to give to those causes she supported throughout her lifetime, in her name. The trust should continue being able to give for many decades to come. 

Discussing your inheritance plan

You may be interested in finding out more about charitable trusts like the example above. If you have any questions or you would like us to work closely with you and your solicitor in the establishment of an investment charitable trust, please do get in touch. We’d be happy to discuss your hopes and intentions in detail. 

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.