This article was taken from Mastermind, the official monthly newsletter of Sanlam Private Investments, a division of Sanlam Ltd. Visit the SPI Website
Charitable bequests are an easy and effective way to leave a lasting legacy etched in the minds and hearts of others.
A charitable bequest is simply a distribution from your deceased estate to a charitable organisation by a bequest in your Will. This article outlines the benefits of charitable bequests and how you can go about making them.
Benefits of charitable bequests
A deduction for estate duty purposes is allowed in respect of the value of property bequeathed to a public benefit organisation exempt from tax in terms of the Income Tax Act (hereinafter called ‘qualifying PBO’). This means if you bequeath your entire estate to such a qualifying PBO, no estate duty will be levied.
How to make a charitable bequest
A charitable bequest can be made by bequeathing an amount to a charitable organisation (of choice) or to a charitable trust created in terms of your Will. The foregoing must however be qualifying PBOs.
A charitable trust could provide flexibility if you do not want to limit the distribution to just existing charitable organisations and would prefer to benefit various other existing or future charities over time.
You can do this by empowering the trustees of the charitable trust to exercise their discretion to benefit these charities as and when the need occurs. However, should a specific existing charity be close to your heart, a direct bequest to that charity will be more suitable.
As outlined above, a bequest to a charity will qualify as a deduction for estate duty purposes provided it is made to a qualifying PBO, such as the World Wildlife Fund (WWF). Bequests to a charitable trust created in terms of your Will may also qualify for the said deduction provided certain criteria are met.
You can bequeath an amount in cash, either a fixed amount or calculated as a percentage of your residual estate, or you can bequeath a specific asset, such as a piece of land or valuable collector’s items or even a combination of these.
You are also entitled to attach certain conditions to such a bequest. However, proper consideration should be given to how these conditions are phrased to ensure your chosen charity is not prevented from making optimal use of the legacy.
There are several ways to provide for charitable bequests in your Will and this will largely depend on your personal choice and preference. The charitable bequest should be properly provided for in your Will to ensure unfettered use of your legacy with minimum cost implications. In addition, make sure you use the correct wording in naming the charity to ensure that the correct charity ultimately benefits from your bequest. This will enable you to depart this world with a good conscience, perhaps leaving it in a better state than you found it.
The tools and techniques described above are not exhaustive and are mentioned in general terms. There could be other solutions more suitable to your personal circumstances.
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