THE TAXMAN DONATES
SEVEN OUT of ten people never make a will and, of those who do, only a small minority leave a legacy to charity, even though most have made charitable donations during their lifetime. The financial consequences of dying without a will could be serious. Your estate may be shared out according to legal rules that do not reflect your wishes. Thousands of pounds can be lost if a will is not properly drawn up and validly witnessed. Most disputes about wills relate to those made without the benefit of legal advice.
Making a will with proper advice and ensuring it is reviewed whenever circumstances change guarantees your chosen beneficiaries will receive what is properly due to them.
With property prices, particularly in London, at record levels, inheritance tax is more of an issue today than ever before. If you own a property in the capital, the taxman will more than likely benefit from your estate at the expense of your family and friends. Tax planning and including a legacy to charity in your will could reduce the amount going to the taxman.
Against a background of cuts in funding to the charitable sector, the Government is now encouraging charitable giving through more — and higher-value — legacies. The Government is not only supporting the principle of giving to charity by will, but providing a tangible incentive to do so, through the reduced tax rate on the remainder of the estate.
Not only will a charity bequest reduce your taxable estate, but if its value exceeds the critical ten per cent threshold, the tax rate applied on the remainder of your estate passing to your family will reduce from 40 per cent to 36. So the cost of a legacy to charity will now be borne by the Government in saved inheritance tax.
And if you have already included charity legacies, but they fall just below the ten per cent threshold, increasing the legacies beyond that tipping point could result not only in a larger gift to the charities, but also an increase in the amount passing to your family. That is because the increase in the charity legacies triggers the lower rate of tax, so the cost of both comes wholly from the taxman.
This is a welcome move by the Government. Never has the climate for giving to charities by legacy been so favourable.
The incentive introduced by this change does more than has ever been done before to both benefit charity and at the same time minimise the cost to your family of doing so.
For further advice on wills and leaving a legacy to charity, contact Carolyn Addleman, director of legacies at JNF UK, 020 8732 6126, carolyn@kkl.org.uk