Leaving Gifts To Charity In Your Will

Back in 2012, the government introduced new rules encouraging individuals to leave gifts to charity in your will. This rule has remained unchanged ever since.

Leaving a gift to charity is free from Inheritance tax (IHT) which is charged at 40% on any estate worth more than £325,000. If you leave 10% or more of your net estate to charity, you will benefit from a lower inheritance tax rate of 36%. So, in some scenarios donating more to charity could actually lower your IHT bill which could mean you have a bit more to leave to your beneficiaries overall.

HMRC have a calculator tool that helps you work out the charity donation required to qualify for the reduced rate and will check whether your existing assets are sufficient to qualify for the reduced rate.

The donation to charity can be a fixed amount, an item, or the balance of what’s left after other gifts have been given out.

Sometimes people choose to leave some or all of the residue to charity. This is what is left of the estate after all legacies, debts and expenses have been paid. However, this may mean that they might not all get an equal share. For example, if you give some of your residuary estate to a charity and the rest to a family member then that person could end up receiving less because the tax will be deducted from their portion.

Some family members might be fine with you donating a portion of your estate to charity, but others may not. Under the Inheritance Act, a beneficiary could dispute your will if they believe it didn’t make sufficient financial provision for them. They could also argue that you were not of sound mind when you wrote your will. Think about whether your donation could create rifts within the family.

If you would like to discuss inheritance tax solutions, please get in touch.

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