Gifts to charity in your will
Many people find it difficult to decide who they want to inherit from them when they pass away. Most will consider their partners, children, family or close friends as the obvious choice of beneficiary, but many will not have considered gifts to charity.
In 2017, a total of £10.3 billion was given to charity by the Great British public. This is a huge sum and goes some way to demonstrate that at some point, most people will have donated, perhaps by a monthly direct debit, raising money by participating in a sports event or perhaps even purchasing a cake or two in a cake sale. Charitable giving in Wills can be unpopular, as understandably people want to prioritise their loved ones. However, in some cases, carefully planned charitable gifts could actually increase the amount payable to family members due to the relief available.
At present, any gifts left to charity in your will are exempt from inheritance tax. In addition, if you leave more than 10% of your net estate to charity, this could result in a lower rate of inheritance tax being applied to your estate overall. For example:
Gabrielle, who is unmarried, has an estate worth £425,000 and wishes to leave this to her partner. The inheritance tax calculation would be:
£525,000 minus £325,000 (current nil rate allowance) = £200,000 x 40% (inheritance tax rate) = £80,000.
Gabrielle’s partner would receive £445,000
If Gabrielle left £20,000 of her estate (which is 10% of £200,000) to charity the calculation would be:
£525,000 minus £325,000 minus £20,000 = £180,000 x 36% (reduced inheritance tax rate) = £64,800
Gabrielle’s partner would receive £440,200 and the charity has benefitted by receiving £20,000.
The lower rate, as demonstrated by the above example, can mean that your chosen beneficiary receives more from your estate than if a charitable gift is not given. If you would like any more advice on these issues, please contact our specialist team of solicitors here.