Brexit will potentially have a significant impact on UK legacy incomes over the next five to ten years, due to the economic and political repercussions of the 23rd June vote.
The decision to leave Europe is unlikely to affect the number of legacies received by charities, as it’s not a primary consideration when writing a will. Furthermore, any impact it does have on people’s behavior will take many years to work through – so in the first five years at least, the impact would be minimal. However, Brexit will affect the value of legacies received – particularly the more lucrative residual bequests (worth around £40,000 each on average).
In the short-term we are undoubtedly in for a period of considerable uncertainty. This initial period of uncertainty is likely to remain for anything between two and a half years and five years. The earliest that Article 50 of the Lisbon Treaty will be activated will be six months; as David Cameron has said that it will not happen until a new British Prime Minister has been elected. It seems likely that the UK will want to undertake some informal discussions before they invoke the Article, so it will probably be longer than six months before it is actioned (though the EU may try to force a more rapid timeframe). After that, the time period for formal negotiations to withdraw from the European Union is two years.
In the medium and longer term, legacy values will be driven by the growth trajectory of the post-Brexit British economy, and the trading relationships we establish with our former EU partners and the rest of the world. Most commentators suggest that GDP growth will be adversely affected in the longer-term – albeit the consensus is that the impact will not be disastrous.
And if Britain is able to establish strong trading relationships with both new and existing partners – as the Leave campaigners believe – then our economic performance could indeed be better than it would have been under the European Union umbrella, especially over the longer term.
It’s also important to remember that, notwithstanding the depressed economic position, the number of legacies received by British charities is still set to grow over the next decade, as the number of deaths start to climb. Although rising deaths can never be considered a cause for celebration, this may be some comfort in the confusing months ahead.