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Gifts to Charity

Many people give to charities during their lifetime, but the extent of their generosity is limited by their means, and other spending priorities. On the basis of the truism that "we are all worth more dead than alive", a Will may offer the opportunity to be more generous.

It is also an appropriate time to show a final appreciation for any help and support that you, or a loved-one, may have received from a particular charity. It was there to help through the generosity of others; it will be available to those who follow through your benevolence.

When choosing a charity that you wish to benefit in your Will, it is important to ensure that you properly identify the exact charity that you have chosen. Otherwise your gift could bring about rancour, argument or even legal proceedings.

This is best done by quoting the Charity Registration number allocated to the individual organisation by the Charities Commission. You should also consider, and make clear, whether you intend the bequest for the national body, or a local or regional branch, where that kind of structure exists.

Although charities would generally prefer that you didn't, you can specify the purposes for which your bequest is to be used. In addition it is prudent to provide for circumstances in which a charity may have closed, or merged with another, after the writing of your Will.

Gifts to Charity and Inheritance Tax

If your estate is worth over £325,000 when you die Inheritance Tax may be due.

From 6 April 2012, if you leave 10 per cent of your estate to charity the tax due may be paid at a reduced rate of 36 per cent instead of 40 per cent.

Where an estate is liable to Inheritance tax, there is an additional benefit in that charitable bequests are tax-exempt.

Any gifts you make to a 'qualifying' charity - during your lifetime or in your will - will be exempt from Inheritance Tax.
In order to qualify for the reduced rate you must leave at least 10 per cent of the net value of your estate to a qualifying charity.
The net value of your estate is the sum of all the assets after deducting any debts, liabilities, reliefs, exemptions and the nil-rate band.
A qualifying charity is an organisation that’s recognised as a charity for tax purposes by HM Revenue & Customs (HMRC). For Inheritance Tax purposes a Community Amateur Sports Club (CASC) is also treated as a qualifying charity.

Example of how to work out what inheritance tax is due

Robert died on 17 June 2012 leaving an estate valued at £750,000 after the deduction of liabilities. He leaves £50,000 to the National Trust in his will. To calculate the inheritance tax due:-

Step 1 - deduct the £50,000 National Trust donation from £750,000 (the net estate). This leaves a figure of £700,000.

Step 2 - deduct £325,000 (Inheritance Tax nil rate band) from £700,000. This leaves a figure of £375,000.

Step 3 - add £50,000 (the value of the National Trust donation) back to £375,000. This gives a figure of £425,000 - the ‘baseline amount’.

10 per cent of the estate of £425,000 is £42,500. This estate qualifies for the reduced rate of Inheritance Tax because the charitable donation of £50,000 is more than 10 per cent of the ‘baseline amount’.

The Inheritance Tax payable will be £135,000 (£375k x 36%) compared to £150,000 (£375k x 40%) if Inheritance Tax was paid at the full rate.

Many will find the charity of their choice preferable to the "compulsory charity" - the Exchequer.

Legacies – A nice way to say THANK YOU!

We would be only too pleased to help you make your Will. You can look at some charities that would be only to pleased to receive a gift in the form of a legacy by clicking on any of the following links.