Co-founder of nfpSynergy Joe Saxton has challenged the sector to demonstrate the usefulness to charities of lifetime legacies, also known as charitable remainder trusts (CRTs). “A lot of people think they are amazing but I’m mystified as to why people think it will be a revolution in giving,” says Saxton.

He is calling on the Charities Aid Foundation (CAF) to carry out a feasibility study to ascertain who might give such a legacy and what value they would be to the charitable sector.

CAF’s head of policy, Hannah Terrey, says: “CAF is already working with a group including legal experts and charities to develop a model for lifetime legacies, which would be accessible to a wide range of charities and easy for donors.” CAF has looked at the use of CRTs in the United States and Terrey concludes: “It is a really effective way of engaging with people, once they have made the pledge, they often give more money during their lifetime. We think it has huge potential in a portfolio of mechanisms for giving.”

Many philanthropists and philanthropic bodies were disappointed that lifetime legacies, that offer tax breaks and an annual income for those making irrevocable pledges to will shares, cash or property to charity, were not included in the government’s spring Budget. The independent Philanthropy Review led by Tom Hughes-Hallett is working hard to see them introduced.

Richard Cassell, partner at Withers Worldwide, talking recently about lifetime legacies, said they would deliver many benefits apart from tax incentives, including donors being able to be acknowledged for their gift in their lifetime and charity recipients being able to plan better based on the knowledge they were to definitely to receive an asset, instead of having to rely on pledges. 

He said lifetime legacies would work well for those who had more than £10,000 in assets to give and would benefit education, hospitals and medical institutions, museums and cultural organisations, but were not good for gifting works of art.

Fundraising consultant and director of More Partnership Adrian Beney describes lifetime legacies as “jam tomorrow definitely” and argues: “Growing philanthropy in the UK will depend on making it easier to give away assets tax effectively.”

Alana Lowe-Petraske of Withers LLP Charities and Philanthropy Team, points out that: “The Institute of Legacy Management and the Charity Tax Group  - which are not at all philanthropy sector bodies themselves - are squarely behind this proposal, as are charities such as Cancer Research UK.”

Lowe-Petraske says:”If introduced, they would sit alongside lifetime gifts of cash via Gift Aid and payroll giving, gifts of land and qualifying investments, and of course legacies on death.  Lifetime legacies are also likely to be attractive to a demographic that UK fundraising has anecdotally found hard to reach - the so called 'mass affluent'.”

Cassell says implementation would be would be relatively easy in the UK as it would not require changes to the current tax and regulatory system and existing paperwork could be used.

Saxton however, perhaps illustrating the crucial difference between charity-centric fundraising and donor-centric philanthropy, raises questions over the usefulness of lifetime legacies to charities in the UK. “The charity doesn’t get any money until the donor dies. The money promised can’t be used as collateral to borrow more money.”

Beney disagrees: “Although it is a restricted fund for the lifetime of the donor, it nevertheless strengthens the capitalisation of the recipient organisation, and can be used as security against a loan.” Some charities in the United States use CRTS in this way. Terrey also confirmed that CAF is looking at how charities may be able to release some money during the donor’s lifetime or use CRTs as security against loans.

Saxton however says there are negatives to introducing lifetime legacies: “It is complicated to explain and any charity advising a donor to set up a lifetime legacy could be exposing themselves to criticism if something went wrong with the arrangement.” 

Saxton is worried that philanthropists will persuade the government to introduce lifetime legacies “using up political capital” on something that will only be useful to a limited number of people.

Beney says: “I have some sympathy with this argument, but given that the best thing the fundraising sector could come up with was 1) keep cheques, 2) do more on legacy giving and 3) get more young people to give, then I think CRTs are more specific and practical.”

Saxton also wants the philanthropic and fundraising communities to establish greater dialogue. “They don’t talk to each other enough and they are not on the same wavelength. The philanthropic community is promoting things like payroll giving and charity cheque books that are not as important to fundraisers. Fundraisers would prefer people to give by direct debit than payroll giving and CAF had a cheque book idea for decades that has never taken off.”

Terrey confirmed that she would welcome closer conversations between philanthropists and fundraisers. "Fundraisers are key because they tell the stories and prompt people to give. Payroll giving and charity cheque books are just ways to make it easier to give."

In the US there has been much made of donors using lifetime legacies to avoid paying tax and this has been cited by government as a reason not to introduce them here:

Lowe-Petraske says such risks could be addressed quite easily: “The possibility of donor fraud would be addressed by the required use of standard forms to be issued by HMRC as well as by requiring the charity or a professional trustee to hold the gift during the income-generating period."

Read more about lifetime legacies

A definition of lifetime legacies

Disappointment that lifetime legacies were not included in spring 2011 budget