Charitable legacies: The time to act is now

If there is any opportunity in fundraising at the moment, it’s in legacy giving. 

In the UK, over 80% of household wealth is held by the over-45s. The slightly older baby boomer generation (people born from 1946 to 1964) currently has more wealth than any previous generation; the majority of which is held in property and pensions.

Average UK house prices reached a record level of £250k at the end of 2020, a rise of 48% over the last ten years and pension reforms have enabled investors to increase their savings for retirement. 

This perfect storm of high interest rates, property and pension reforms has meant the next generation of beneficiaries are set to inherit more overall wealth than any generation before them.

As such, charitable legacy income is expected to bring in an average of £4.2bn per year, Legacy Foresight has predicted. This is a 26% increase on the average legacy income from the previous five years, with charities seeing an average of 134,000 -137,000 bequests per year over the next five years.

What are charitable legacies?

A legacy allows a donor to make an exceptional gift to a cause they are passionate about, while offering reassurance that the gift will not impact the donor’s standard of living or assets during their lifetime.

Legacies, also called bequests, are gifts that an individual creates when they are alive that take effect upon their death. The two main types of legacy gifts in the UK are:
•    Pecuniary Bequest: “I leave £x amount to the charity.” 
•    Residuary Bequest: “After I give out £x amount to my friends and relatives, the rest will be given to the charity.” 

In 2020, the average residuary legacy in the UK was worth £50,900 and the average pecuniary gift £3,400. All charitable donations benefit from being exempt from Inheritance Tax (IHT).

Legacies and the arts

In the arts, legacies are a neglected area of fundraising. There are many reasons: embarrassment about asking for funding through wills, worry about not having the capacity or technical knowledge and, perhaps the main one, that the income from legacies is necessarily long-term and unpredictable. Arts organisations neglect it as an form of investment as they need money now. 

While we might feel highly awkward talking about legacies, legacy fundraising has the highest return-on-investment fundraising ratio in the sector at 33:1, with £33 raised for every £1 spent. For comparison, the fundraising ratio for the arts sector’s often preferred method of trust fundraising is £6-7 for every £1 spent. While income from legacies might take time to realise, its potential return is too high to ignore.

And if you are an arts organisation based in a seaside town, there is even more reason to act. Nationally 13% of probated estates include a charity gift, this proportion rises to around one in five in some seaside towns with Brighton, Bournemouth and Exeter having particularly high concentrations of charitable wills.

Overcoming the hurdles

Being actively asked to make a bequest is the number one reason cited for making such a gift. 33% of people who put charities in their wills said it was due to the charity actually asking them, showing that the embarrassment about asking usually sits with the fundraiser rather than the potential donor. So while we need to be sensitive in how we ask, we shouldn’t be afraid to ask. 

Many pledgers want to give something back to a cause that has been important in their lifetime. As such, the usual targets for legacies are people that arts organisations already know well. This could mean those with a personal connection to the cause, long-standing donors, volunteers, trustees or existing or former staff.

Furthermore, legacy fundraising can be set up with relatively little start-up cost and has very low maintenance cost. In legacies we seek to evoke safety and nostalgia, so our campaigns need to achieve the opposite of innovation. Our messaging needs to convey security, to outline how we will look after a pledge and to be central to our core mission.

Of course, charities must comply with the Charities Act when seeking legacies and have the power to act as an executor if asked. This means that the charity must have trust corporation status or be able to appoint an individual as executor on its behalf. This hurdle can be overcome by putting in place a simple partnership with a solicitors’ firm.

So, as we put together fundraising strategies, the arts should look to firmly include legacies as part of their strategic plans. Our 30-year window for recognising this extraordinary period of wealth transference starts now, and the clock is most definitely ticking.

Michelle Wright is CEO of Cause4 and Programme Director of the Arts Fundraising & Philanthropy Programme. 
artsfundraising.org.uk
@artsfundraising | @MWCause4

This article is part of a series on the theme Fundraising for the Future, contributed by Arts Fundraising & Philanthropy.