Charitable giving is a powerful way to leave a lasting legacy. You can make an impact far beyond your lifetime by including donations to causes close to your heart when writing your will. It is a great way to give back, but sadly often underutilised. South Africa is marking Mandela Day this month, so a great time to think about including charitable giving in your will.
Charities and non-profit organisations work hard to address problems and fill gaps in our society, often looking after people and areas that are underserved. They do inspirational work that uplift local communities by providing vital lifelines, however they must often depend on donations to keep running.
“South African estate law allows you to support worthy causes by bequeathing assets to them in your will. Best of all, charitable giving is both legal and beneficial – to the charity and your estate,” says Ken Newport, national manager of Succession Planning at Capital Legacy.
What is charitable giving?
Whether you support education, healthcare, animal welfare or the environment, your legacy could live on in support of the causes you care about.
“You can transfer money, assets or property to a registered non-profit organisation after you pass away. This is usually done through a bequest in your will and it is legally binding. What you give and how you structure the charitable gifts in your will are entirely up to you as we have testamentary freedom in South Africa – the right to leave your estate to whomever you choose, including charities,” Newport explains.
You could choose to leave a sum of money, a percentage of your estate, a specific asset (like a property or a vehicle), or what’s left of your estate once debts have been settled, taxes paid, and inheritances distributed. Not only can charitable giving further a cause close to your heart, but it could also reduce your estate duty liability, preserving more for the loved ones you leave behind.
Choose your charity
To ensure your gift makes a real difference and your estate would qualify for tax exemptions, check that the charity is registered with SARS as a Public Benefit Organisation (PBO). This is a company, trust or association that was established in South Africa for the sole purpose of carrying out public benefit activities. PBOs are usually exempt from tax under either the Income Tax Act or the Taxation Laws Amendment Act.
Request the PBO number and read up on the values of a charity, if you are not already familiar with them, to ensure they align with your own. Consider getting in touch with the charity to ensure they can receive and use what you intend giving, especially if it’s a specific asset like property or a vehicle.
Tax benefits
If you do decide to make a bequest to a charity, there could be tax benefits to your estate in terms of estate duty, which is the tax levied on the transfer of assets to your beneficiaries after you pass away.
Bequests to PBOs are exempt from estate duty. So, if structured wisely, giving in this way could not only benefit the charity but also reduce the taxable portion of your estate and therefore increase what’s ultimately passed on to your heirs and beneficiaries.
“If you have minor children, dependents with special needs, or financial or business obligations, make sure these are all adequately covered in your will before setting something aside as a charitable gift,” Newport advises.
Regular review
It is a good idea to review your will at least once a year, or when big life events happen (getting married, having a child, etc.) and the same goes for charitable gifts. If you donate a specific amount to charity in your will, an annual review will help determine whether it is still sufficient and feasible in terms of what else you would like to leave behind. Alternately, you could consider bequeathing a percentage of your estate instead of giving a fixed amount as the values of assets can fluctuate.
Leaving a bequest in your will is one of the easiest and most effective ways to support the work of charitable organisations that do tremendous work in our communities. Bequeathing even a small amount or percentage of your estate to a PBO could make a huge difference to the work they are able to carry out. Every bequest, no matter how small, could benefit your local community and society at large.
