Charitable giving in your Will
Charities across the UK rely on billions of pounds of donations to continue their work. Many people consider making donations in their Wills and this is known as a “charitable legacy.”
These legacies can have an enormous impact on charities as well as helping out the local community or giving back to organisation which have provided you with support.
For example, Designability is a national charity but is based in Bath. In a nutshell, Designability provides assistive technology to people living with a disability. That can be anything from products to keep people safe and secure in their own homes if they suffer from dementia all the way over to the other side of the spectrum where they provide powered wheelchairs to children under 5. Visit www.designability.org.uk for more information.
One of the projects deals with the fact that generally there is no NHS funding for powered mobility for children under 5. To deal with this, the charity fundraises to make “Wizzybugs” available free of charge to children in the British Isles who could benefit from them.
Wizzybugs are fun and innovative powered wheelchairs (brightly decorated with eyes and a smiley face!) which help young children with mobility issues.
Whilst charitable legacies clearly help with fundraising, there can be additional benefits with regards to reducing an Inheritance Tax bill.
Inheritance tax is normally charged at 40% of the ‘net estate.’ However, if 10% of the net estate is given to charity, this can reduce Inheritance Tax to 36%.
This can be illustrated by a simple example:
- You are unmarried and leave all of your assets to your children
- Your net estate was worth £400,000
- You have an Inheritance Tax allowance known as the nil rate band (currently £325,000)
- The net estate is therefore £75,000 upon which tax will need to be paid at 40%
- The tax bill will therefore be £30,000.
However, take the example of leaving 10% of your net estate to charity:
- You would leave your children £360,000
- £40,000 would be left to charity (which is 10% of the net estate value of £400,000)
- The estate would pay 36% on £35,000 (£360,000 – £325,000) worth of assets meaning that your estate would pay £12,600 in tax.
If you would like to discuss making a Will or reviewing your estate planning please get in touch with us.