BLOG: Taking the Sting out of disinheritance
Should children be provided for in their parents’ inheritance or make their own way in the world? Sting’s children have likely benefitted from their father’s fortune in a variety of ways already, including receiving a good education and an enviable address book, so do they need a large additional sum from his will? Is it fair for us to assume that young people will even want the bulk of their parents’ inheritance?
Warren Buffet famously stated that he wanted to leave his children “enough money so that they would feel they could do anything, but not so much that they could do nothing.” Buffet knows, as many philanthropists do, that the decision to distribute wealth, rather than to retain it within a family, is of benefit not just to charities and the wider community but to philanthropists and their families.
When it comes to tackling issues that affect communities, UK Community Foundation’s 2013 research report into community philanthropy, the Shine a Light report, found that giving locally is thought to be almost twice as effective as giving to national or international causes, with double the number of people confident that when they give locally, the money goes to those most in need. Our research also showed that many people feel they have to play an active role in helping their community to address any issues it faces.
When thinking about how to help your legacy to work hard in your community after you’re gone community foundations offer ways of making your money go further. Community First, for example, is a scheme set up by the Cabinet Office which offers a 50 per cent Government match on funds donated. For example, if a £100,000 donation is given to a community foundation, the matched funding means an additional £50,000 will be ring fenced to benefit communities. The community foundation can then claim £25,000 in Gift Aid (if the donor has paid enough tax), bringing the total benefit from the donor’s £100,000 investment up to £175,000.
Giving to charity is not only good for the community, but also good for your tax efficiency. Among the many changes introduced in the 2011 budget, you can now leave 10 per cent of your estate to charity and the tax due may be paid at a reduced rate of 36 per cent instead of 40 per cent. Also, any gift left to a charity or local community project will have its value deducted from your estate before inheritance tax is calculated.
What to do with their inheritance is a huge decision for those fortunate enough to have one. Of course, providing for family is a top priority for most. However, UKCF also believes that you don’t have to stop giving to causes that you’ve been passionate about and community foundations are there to discuss the options available to those wishing to leave a lasting benefit to your community.
Mark Greer is philanthropy director at UK Community Foundations.