Last week’s headlines forecast that the coming rise in probate fees could see charities losing out on £10m a year as the public cuts back on gifts in wills. But that’s not the end of the story. If anything, it means now more than ever, the sector needs to come together and take action.
However, with just a bit of an adjustment, this could actually be one of the biggest opportunities for growth that the legacy marketplace has ever seen.
Legacy behaviour is key as income growth slows
Over the past decade and more, we’ve come to rely on a rapidly growing legacy marketplace, which is now worth over £3bn each year. More and more charities are fundraising for legacies and the number of supporters is climbing. But the fact remains that, while behaviour is going in the right direction, legacy income is being squeezed amid the uncertainty of Brexit; weakening property prices and falling death rates. All this adds weight to the need to protect and grow the market.
As the storm clouds of the probate announcement pass, it’s clear that we need to do more than plug the predicted £10m annual gap. That means recognising the opportunities that lie within this changing landscape and grasping them with both hands.
Against a tide of rising costs, what provisions can the government make to ensure that legacy income is protected? What’s more, could this new backdrop potentially give us even greater scope to grow the market, seeing more money going to the good causes that donors care about?
Impact of the new fee structure
Under the new rules, almost one in three charitable estates will face a hike in probate fees, with the largest estates costing thousands of pounds. When you consider that around 10,000 charitable estates typically sit above the inheritance tax threshold each year, and over a third of those included gifts above £1m, it is clear that many potential legacy donors will be bearing the brunt of these fees. It’s also clear how much charities rely on gifts in wills; after all, legacies are responsible for around 15 per cent of the entire sector’s annual voluntary income.
What if the new rules were to include an exemption or reduction for those leaving a legacy; an incentive that would benefit all those who leave a charitable estate, not only the wealthy few? Bearing in mind that one of the greatest challenges with legacies has always been getting the conversation started and that we’ve seen how effective the inheritance tax (IHT) incentive has been in this regard, this could be a strong driver for change.
Opportunities for legacy growth
If a discounted rate on probate fees were on offer for estates including a legacy gift, this would give solicitors and will-writers a reason to always raise the topic of legacy giving with clients. These conversations are critical to normalising legacy giving behaviour, with research from the Behavioural Insights Team showing that the number of people leaving a gift in their will doubles when solicitors raise the topic with them.
It’s not always easy for legal advisers and will-writing professionals to raise the issue. After all, they aren’t fundraisers and we don’t expect them to be. We know that there are around 16 per cent of advisers who say they will never raise the option of legacy giving with clients. However by creating an environment where it’s in their client’s interests to consider leaving a gift in their will, where they can access not only IHT benefits but a reduction on probate fees too, such conversations will likely become much more commonplace.
Government has long been supportive of the sector’s collaborative approach to encourage charitable gifts in wills and, with both the charity and legal sector calling for action, we have every reason to believe that ministers will be open to discussing new measures to ensure probate fees won’t negatively impact legacy income.
Working with the Institute of Fundraising, we’ve already written to the Ministry of Justice and the new charities minister, with the support of the Institute of Legacy Management; NCVO, Acevo, and the Society for Trust and Estate Practitioners.
Here, we are all united on the point that we must protect gifts in wills. So let’s turn our heads firmly to the resolutions needed to ensure that the UK continues to have the best possible environment for legacy giving worldwide.
There’s no escaping the fact that the proposed structure for probate fees is a threat to legacy income in its current form, but I genuinely believe that if government is willing to consider our proposal, we have a huge opportunity to transform the legacy marketplace.
Rob Cope is the director of Remember a Charity.