They say that charity begins at home but perhaps it could also be said that it ends with a Will.
Legacies to charities are an essential part of their income stream and can also have tax benefits for the Will-maker and their non-charity beneficiaries such as children.
For most people the main reason for leaving a gift to charity in their Will is to benefit a good cause close to their heart. There are different ways in which a Will can benefit charities including cash legacies, property or shares of the residuary estate (which is what is left over after payment of all debts, legacies, tax and administration expenses). For larger bequests there is the possibility of creating a “charitable trust” in a Will with defined objectives to benefit good causes long after death.
An added bonus is that charitable gifts are completely inheritance tax (IHT) efficient as such gifts are 100% exempt from the tax. Not only that, but if a Will has a mix of gifts to charities and non-charities (i.e. relatives) then if 10% or more of the estate passes to charity then the IHT rate applicable to the rest of the estate drops to 36% from 40%.
You could even have a perfectly IHT-free Will by leaving your IHT exempt amount (currently £325,000 for one person) to children and then leave the residuary estate to charity. That way you benefit the charities you hold dear and make provision for loved ones. These IHT benefits are designed to encourage people to make charitable gifts in their Wills.
There are tax benefits of charity gifting for Capital Gains Tax as well and a full appraisal of your personal circumstances is required to see what best suits you in the most tax-efficient way. The same IHT benefits van also be obtained when making lifetime gifts as well as those by Will.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.