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Leaving a legacy to your favourite Charity:
Reasons you may wish to leave money to a charity
There are a number of reasons why you may want to leave money to a Charity in your Will. It may be that you wish to support a charity who have helped you during your lifetime or simply to assist in reducing the amount of Inheritance Tax payable on your estate.
Should you pass away without leaving a Will, your estate will be classed as Intestate – meaning that it will be dealt with in accordance with the Intestacy Rules and distributed accordingly.
Unfortunately this means that you have no control as to what becomes of your estate and you are unable to direct that donations be made to your favourite charities.
If you have no direct relatives and die Intestate, then it is possible that your estate will end up with the State and therefore you may wish to give your estate to charity rather than it ending up back with the government.
In order to achieve any of the above, it is imperative that you make a Will to dictate how you wish your estate to be dealt with.
I heard that charitable giving can reduce your IHT bill – how does this work?
If your estate is over the Inheritance Tax Nil Rate Band, it is possible that you will need to pay Inheritance Tax when you die. One way of reducing that tax bill is to make gifts to charity, although there are some rules.
To qualify the Charity receiving the gift must be officially registered with the Charity Commission. Any money left to such a charity will be free of IHT.
To encourage people to make such gifts the government provide an additional incentive. Provided the gift you make is equivalent to at least 10% of your taxable estate, then the rate of Inheritance Tax is reduced for the whole estate from 40% to 36%, resulting in the overall tax bill being reduced.
What types of gifts can you leave to charity?
They main gift people think of making to Charity under their Will is a monetary gift. However, some charities may be happy to receive gifts of articles too, especially charities such as museums etc.
In total, there are three types of gifts that can be left to charity:
This is a simple on off monetary gift of any amount to a specific charity.
This is where you may wish to leave specific items to a Charity whether it is for them to keep and display or whether they are then to sell it on to raise funds for the charity.
Once your estate has been finalised and all assets dealt with and all bills paid off, you are left with the ‘Residue’. You are then able to leave this to a Charity or Charities of your choosing and is usually a larger sum. The advantage of settling on a share of your estate such as a percentage of the residue is that the gift will always keep pace with changes in the value of your estate whether that happens to be an increase or a decrease.
If you would like to speak to one of our friendly expert team of Will writers, please contact us on 08004700331 and we will be happy to discuss your needs further.
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