Analyst company Legacy Foresight has forecasted that legacy income for charities could decrease by up to 9% this year because of coronavirus.
For many charities, a big portion of their income is raised through charitable bequests in wills. Such bequests may be in the form of fixed sum, such as a gift of £10,000, but very often, particularly if the person who has made the will had no close family, the bequests are taken in residue, or after all debts, bills and taxes have been paid.
The residue of an estate can include property and share portfolios as well as cash. Such assets can be extremely valuable, but their value is inherently linked to market forces.
The current pandemic has seen a fall in the value of stocks globally and the housing market is starting to stall, not only affecting prices but also the home-moving process, and as a result many executors are struggling to sell.
On top of this, personal representatives can't liquidate assets without a grant, and so payments to charities may be delayed due to a backlog in the processing of applications for grants of representation as a result of ongoing staff shortages relating to the pandemic.
One solution is to transfer assets to charities in specie; for example, to transfer physical assets such as shares directly to the charities rather than cashing them in. This allows the charity to enjoy any income which may arise and then sell the shares at a later date when the market is more buoyant. As charities pay neither income tax nor capital gains tax, then this is a way forward which may suit both parties and help speed up the estate administration in the process.
Legacy income expected to fall by up to 9% this year