Most people want to make a difference during their lifetime. This may be achieved by giving up time to volunteer for a local charity, campaigning for action against a worthwhile cause or simply by donating to a charity.
As well as donating to a charity during their lifetime, an individual can make a gift to a charity in their will which takes effect after they pass away. The will may state a certain monetary legacy should be given to a charity (i.e. £10,000) or alternatively, it may specify a certain share of the estate (i.e. 25%). An individual also has the option of specifying the circumstances in which a gift should be given to charity, for example, only in the event the remaining beneficiaries (i.e. a spouse) dies before administration of the estate.
Deciding what charity will benefit from a gift takes some consideration. There are thousands of registered charities in the UK which cover a wide range of causes from animal charities to homelessness charities. If someone has a special connection to a particular charity because of personal circumstances, their decision in choosing a charity may be easier. However, for individuals that do not have a personal connection to a charity, how do they decide which charity should receive a gift under their will? Do they donate to a charity that receives little/no funding from the government or do they stick with the larger, more well-known charities whose works are well publicised?
One theory that has grown in popularity in recent years and can be used as tool in deciding what charity to choose is the theory of effective altruism. This theory focuses on investing in charities that make the biggest impact in order to see the biggest ‘return’ in a donation. Impact is calculated by looking at how many people will be affected by the work of the charity and how many other charities are working to tackle the same problem. The theory adopts a rational and measured approach for deciding what charity to donate to. It is similar to the well-known theory of utilitarianism which focuses on maximising happiness for the maximum number of people.
Effective altruism may also influence the amount individuals decided to leave in their will. This in turn affects the amount of residue estate available for other beneficiaries such as family members. It is important to discuss wishes with family members, however in the event a family member does not consider reasonable provisions have been made in the deceased’s will, the Inheritance Provision for Family and Dependants Act 1975 is in place to assist with claims. Under the Inheritance Act 1975, the court will objectively consider whether the will (or if no will, the intestacy) failed to make reasonable financial provisions for the claimant taking into account all circumstances of the case.
Effective altruism is considered by some as a useful tool in determining what charities should benefit from a donation. The benefits and weakness of this theory will be explored in more detail over the next two blogs.