12 Feb How Legacy Giving can reduce your Tax Bill
Who are you going to leave money to in your Will? Your spouse or partner is probably first in line, any children or extended members of the family may pop up here and there too. But what about a charity?
Thousands of people every year choose to leave a gift to charity in their Will, whether it’s a fixed amount, a fixed percentage of their estate, or even just what’s left after other gifts have been handed out to your surviving loved ones.
It doesn’t have to be a charity that you have been particularly involved with during your life either – you can leave money to any registered charity.
There is another bonus to doing so, besides simply helping a good cause. Legacy giving – where you leave money to a UK registered charity – can also reduce your Inheritance Tax bill.
With inheritance tax, your estate is charged a rate of 40% of the value of your estate that is above the ‘nil rate band’ (tax-free threshold) – which currently stands at £325,000 (or £650,000 for couples after 2nd death).
However, when you leave money to a UK registered charity, it reduces the value of your estate for inheritance tax purposes, as gifts to such charities are also tax-free, hence it gives you the opportunity of potentially reducing the value of your estate below the nil rate band, ensuring no inheritance tax is payable.
Even if your estate is still valued about the nil rate band, charitable giving can help reduce the amount of tax you pay. If you leave a minimum of 10% of your net estate to UK registered charities, then the inheritance tax charged on the remainder of your estate qualifies for a 10% reduction in inheritance tax – from 40% to 36% – which could see the estate save thousands of pounds in tax.
Many people regularly give to charitable causes, and would like to do so after they die too. Not only can they help support good causes with some of their estate, but there are tax benefits that come with it, provided the right advice is taken when drafting their Will so the correct provisions can be put in place in a watertight fashion.
Heir Tight Wills helps clients put in place robust provisions and valid documents, to protect their loved ones and their assets both during their lifetime and after their death. For a FREE Consultation to discuss writing or updating your Will & estate planning provisions, contact Rachael Rodgers on 0845 519 7585, or CONTACT US via email.