Estate Planning Essentials: Structuring Bequests and Charitable Gifts

Estate planning is often treated as a document exercise: write a will, name beneficiaries, sign the papers and put everything in a drawer. In practice, the important question is how those instructions will work when assets, family circumstances and tax rules are taken into account.

Charitable gifts can be part of that planning. They can provide a clear destination for part of an estate while, depending on the jurisdiction and structure, offering tax advantages. The structure matters, though. A charitable intention written vaguely into an estate plan can create unnecessary work for executors and uncertainty for beneficiaries.

Start With the Type of Gift

The simplest option is an outright bequest. A will can leave a fixed amount of money, a particular asset or another clearly identified item to a qualifying charitable organisation. This approach is relatively straightforward, although a fixed cash gift may lose purchasing power over time.

A percentage bequest can be more flexible. Instead of specifying a particular amount, the document can allocate a defined percentage of the estate. The value of the gift therefore rises or falls with the overall value of the estate.

A residuary bequest works differently. The charity receives some or all of what remains after debts, expenses, taxes and other specified gifts have been dealt with. This can be useful when the priority is making sure family members and other beneficiaries receive defined amounts first.

There’s also a contingent bequest. The charitable gift takes effect only if a stated condition occurs, such as a named beneficiary dying before the person making the will.

The wording isn’t a minor detail. Each provision should identify the beneficiary accurately and explain what’s being transferred. Executors shouldn’t have to interpret an unclear charitable intention after a death.

Consider the Asset, Not Just the Amount

A charitable gift isn’t always about writing a cheque from the estate. The asset being transferred can affect valuation, liquidity and administration.

Cash is straightforward. Shares and investments, property, business interests and other assets can require additional consideration. Life insurance policies, pensions and other assets may also have separate beneficiary or nomination arrangements, meaning the wider estate plan needs to be coordinated rather than treated as a collection of separate documents.

For larger estates, specialised charitable structures may also be appropriate, depending on the jurisdiction and the donor’s objectives. The right structure could affect when a gift is made, who benefits from an asset during the donor’s lifetime and how the remaining assets are distributed. That makes professional advice particularly relevant where an estate includes a business, substantial investments, overseas property or complex family arrangements.

UK and US Tax Rules in 2026

The tax treatment of charitable gifts differs significantly between the UK and the United States.

In the United States, qualifying charitable transfers can generally be deducted from the gross estate when calculating federal estate tax. The IRS provides for charitable deductions through Schedule O of Form 706 for qualifying gifts and bequests to eligible organisations.

There’s also a significant 2026 update. The US federal basic exclusion amount for people who die during 2026 is $15 million, compared with $13.99 million for 2025. This doesn’t eliminate the need for estate planning, particularly where state-level estate taxes, asset ownership, liquidity or complex beneficiary arrangements are involved.

For UK estates, the framework is different. Gifts made outright to qualifying charities are generally exempt from Inheritance Tax. In addition, where at least 10% of the relevant net estate is left to charity, the applicable Inheritance Tax rate can be reduced to 36%. The 10% test is more technical than simply giving away 10% of everything owned, so the calculation and wording of the will can matter.

The distinction is important for anyone making cross-border plans. A donor living in one country may own property, investments or business interests in another, potentially bringing additional tax and reporting considerations into the estate plan.

Lifetime Giving and Gifts Through a Will

Charitable giving during life should also be distinguished from a charitable bequest made after death.

In the UK, qualifying lifetime donations can generally benefit from Gift Aid when the relevant conditions are met. A charitable gift made through a will is instead considered within the Inheritance Tax framework. The two mechanisms shouldn’t be treated as interchangeable.

In the US, lifetime charitable contributions and charitable transfers at death are also subject to different rules and requirements. The applicable treatment can depend on the type of asset, the organisation receiving it and the taxpayer’s circumstances.

For families considering a charitable legacy, an appeal such as a Muslim charity appeal can be one option to consider alongside the wider estate plan. The important point is to establish exactly which organisation is receiving the gift and how the intended contribution should be documented.

Building a Clearer Legacy Plan

Good estate planning is less about adding complicated structures and more about matching the legal mechanism to the intended outcome.

Someone who wants a charity to receive £20,000 or $20,000 may need little more than a specific bequest, depending on where the estate is administered. Someone who wants a charity to receive part of whatever remains after family obligations are met may be better served by a residuary clause.

The same principle applies when choosing the charitable organisation. The legal name, registration status and intended use of the gift should be verified. In the UK, GOV.UK advises checking that an organisation qualifies for charitable tax treatment; the US has its own requirements for organisations eligible for the federal charitable deduction.

A well-structured estate plan should leave fewer questions behind, not more. Clear beneficiary arrangements, precise gift language, coordinated documents and appropriate tax advice can make charitable intentions easier to carry out while protecting the interests of the people and organisations intended to benefit.