Frances Kelly, of Tallents Solicitors in Newark, explains how you can leave a legacy that will help future generations for many years to come.
The current economic crisis has affected the attitudes of many people making donations to charities, making funding more challenging than ever for many good causes. This is at a time when the demands on many charities has never been higher as more and more people rely on their support.
At Tallents we have dealt with many Charitable Trusts and have seen these Trusts struggle with funding over the last few years.
Many people do not realise that a charitable donation in your will is exempt from Inheritance Tax and as such should be considered as an integral part of anyone’s Inheritance Tax planning. After all, wouldn’t you rather help your favourite charity, rather than the taxman?
The current level above which a couple would find their estate liable to Inheritance Tax (IHT) is £650,000 and £325,000 for a single person.
An estate left to family and friends above the IHT level is chargeable at a rate of 40% but many people just don’t realise that if they leave a gift to charity this would reduce the liability on their estate.
David Ryan of East Midlands-based Independent Financial Consultants, Cockburn Lucas, comments:
From 6th April 2012 the government introduced new IHT legislation that could affect anyone planning to pass a proportion of their estate to charity. As already mentioned by Frances, gifts to charity are already exempt from IHT but the new rules mean that the rate of IHT on the rest of the estate can be reduced from 40 per cent to 36 per cent. So although the charity will receive the same amount, the non-charitable heirs should also be better off under the new rules.
We have seen an increase in the number of people who are reviewing their wills in light of the forthcoming changes and inserting charities into their wills as part of their IHT planning.
On death the estate will be divided into different components for tax purposes – each of which needs to be looked at separately. Then within each component, any reliefs or exemptions – such as the available proportion of the nil rate band – will be deducted to ascertain the charitable element.
The new rules are complex and we always recommend taking professional advice. This is a complicated area of law to get right and the last thing you want to do is inadvertently leave the taxman in your will. Always choose a regulated, qualified and experienced legal professional to deal with your will writing requirements and ensure your final wishes will be carried out.
For more information, visit our page on Wills and Inheritance Tax Planning, or call us on 01636 671881.