Legacies in Wills form the foundation of some of the UK’s best known and best loved charities – indeed without them many charities would struggle to exist.
Leaving a gift to charity in your Will is a good way of ensuring that everything you care about is provided for and enables you to continue to support charities that you may have supported during your lifetime. The gift does not need to be large, and even a small gift can make a real difference to a charity.
From an Inheritance Tax perspective, gifts to charity can also form an important part of tax planning. Gifts to charity in a Will are exempt from Inheritance Tax, so if your estate will be subject to Inheritance Tax threshold, a well-placed gift to charity may ensure that less or even no tax is paid (bearing in mind of course that your estate value may fluctuate between the date you make your Will and the date of your death).
There is also a further benefit – from 6 April 2012 if your estate is due to pay Inheritance Tax and you have left 10% of your net estate to charity in your Will, then in addition to the gift to charity being exempt from Inheritance Tax, any tax payable on your estate may be paid at a reduced rate of 36% rather than the usual 40%.
The rules governing this allowance are complex and your Will needs to be drafted carefully to ensure the reduced rate will apply but for those with substantial assets already considering a gift to charity, a properly drafted Will can provide benefits for the rest of the estate.
If you would like more information on how to reduce your inheritance tax bill, please contact Kathryn Caple on 01283 526230 or email kathryn.caple@elselaw.co.uk.