Donating to charity in your Will
When a person dies, their estate will be valued for inheritance tax purposes. The nil rate band, the threshold for Inheritance Tax (IHT) liability currently stands at £325,000 for an individual and £650,000 for a married couple or civil partnership. This means that when someone dies with under £325,000, they will not be liable to pay inheritance tax. If they pass their inheritance on to their spouse, their spouse’s estate will be liable to pay inheritance tax only on anything over the £650,000 threshold. As inheritance tax can take a significant chunk out of your estate’s value, and even leave your beneficiaries in financial difficulties (with a current rate of forty per cent for anything above the nil rate band) it is worth considering how you can minimise your tax liability; something which can be done with a little planning ahead with an experienced Trust & Estate Planning Consultant to guide you with every step to ensure everything is in order for the future, giving your loved ones the maximum benefit of your estate.
Inheritance Tax Planning
There are a few things you can do to minimise your tax liability, such as making gifts to reduce your estate (rules and limits apply to prevent people from giving large amounts of their estate away as a way to avoid tax). Donating to charity is another such option, and there are different ways you can go about it. You can donate a fixed sum or an item, or you can state that you want to donate what is left after all the other legacies have been paid out. Either the donation can be taken off the value of the estate before inheritance tax is calculated, or if you are donating more than ten per cent of the net value of their estate to a charity, you can enjoy an inheritance tax reduction from a forty per cent rate down to thirty-six per cent. The net value of the estate is the sum of all the assets after deducting any debts, reliefs, exemptions and liabilities, and the applicable nil rate band. It may be that only some of your estate qualifies for the reduced rate. The charity you choose is entirely up to you, however, it must be a qualifying charitable body; i.e., a charity registered in England and Wales, or a charity registered in the EU, Iceland or Norway that would qualify if it was in England or Wales.
Speak to our Trust & Estate Planning Consultants about inheritance tax planning. The law surrounding inheritance tax can be highly complex and confusing. We will tailor a plan for you which will bring the maximum amount of your estate within the discounted inheritance tax rate. We can explain your options fully, giving you a clear understanding of the options open to you, and guiding you smoothly throughout the entire process. We believe tax planning and writing Wills should be a stress-free and straightforward experience, and our professional Will & Estate Planning Consultants seek to ensure our clients are taken smoothly through the entire process of preparing a Will. We work swiftly and with precision, tailoring everything to you and your family’s requirements.
Deeds of Variation for Inheritance Tax Mitigation
If you are a beneficiary to a Will and have found that either a charitable gift was not left in the Will, leaving the estate with a large inheritance tax bill, or if the bequeathed charity gift did not amount to ten per cent of the estate, speak to our Trust & Estate Planning Consultants about a Deed of Variation. The Deed of Variation allows beneficiaries to vary the terms of the Will to include a charity donation or to increase the value of an existing charitable donation in order to gain the reduced rate of inheritance tax. Our Trust & Estate Planning Consultants have experience in tax planning for both large and small estates. We will explain your options fully and provide you with a solution to ensure that as much of the estate as possible qualifies for the reduced rate.