Legacy - family or charity?
The first episode of ‘Can't Take it With You' illustrated the difficult decisions faced by those in a second marriage seeking to balance their desire to provide for their children from a previous marriage with a desire to provide for their new spouse. The show highlighted the complexities of modern family living and in particular the rise of second marriages. It brought into sharp focus the freedom that we have in this country to leave our estate to who we wish. This is in contrast to the majority of Europe where legal rules dictate that part of your estate must go to family members.
In both cases the husbands (who had children from a previous marriage) decided that a life interest trust over part or all of their estate would enable them to balance the needs of both spouse and children. Setting up a life interest trust ensures that the surviving spouse could continue to occupy the matrimonial home and access income produced by other family assets but that on the spouse's death the capital from the husband's estate, would pass to the children.
The life interest trust can be structured so as to include a power to allow the trustees to release capital to the surviving spouse if, for example, the spouse had cash flow problems. If such a power is included, the choice of executor/trustee is crucial. The trustee has absolute discretion to advance the capital and owes a duty to the children who will inherit on the surviving spouse's death to ensure that they exercise their discretion properly. The trustee therefore needs to understand properly the needs of the surviving spouse and the children and what the testator wanted for each of those parties.
The other issue raised in the first episode was that of charitable giving. In both cases, the second wife had no relationship with her husband's children and wanted her inheritance to be used for charitable purposes. As Sir Gerry commented "there is nothing wrong with giving to charity" and for many people charitable giving is very important whether gifted alongside bequests to family or otherwise.
Charitable legacies (gifts in wills) are a crucial source of funding for many charities, without which a significant amount of charitable work would simply not be possible. Some of Britain's best-known charities rely on legacy income to underpin their operations. It is a particularly significant source of income for animal and health charities [and in particular, cancer charities and hospices], and as no inheritance tax is payable on gifts to charities, this can be persuasive.
Awareness campaigns and organisations like Remember A Charity, continue to encourage more people to consider leaving a gift to charities in their will, after they have looked after their family and friends.
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