In 2014 alone, UK adults gave £10.6bn to charity (reference CAF website). Charitable giving also continues to be a popular choice amongst people making their Wills.
The question usually arises as to how much to give. Should it be a fixed sum, or a share in the residue, i.e. a portion of the funds in the estate after any other legacies have been paid?
A Share in the Residue
You may be surprised to hear that dividing your estate so that 50% goes to charity and the other 50% to your family is not a straightforward issue. For example, while the maths looks simple, due to the way that inheritance tax is charged, a charity cannot bear tax on its share. In a taxable estate, the result would be that your family would ‘pay’ the inheritance tax and thus get a reduced share, while the charity gets a full 50% using the standard form of Will wording.
If you want to ensure that both your family group and the charity receive a net share which is equal in value, then you must specify this in your will. Your solicitor can help you with this as specialist wording must be used to achieve this result, which after all, is what most people seek to do.
If you choose to give a fixed sum instead, then of course you will control the amount that goes to your charity, but do be aware that if you estate has diminished in value then the fixed cash sums will always be paid first. In cases where your assets have been reduced through the funding of care in later life, this could mean that your family as residuary beneficiaries received less than the charity. It all depends on the value of your estate which can be difficult to predict.
The Best Option
If you are considering making a charitable gift in your will you should see a solicitor, who can assess whether inheritance tax may be payable in your estate, and accordingly give you the best advice for your circumstances.
The New 36% Rate of Inheritance Tax….
A hidden advantage of leaving monies to charity in an estate is that you can even end up paying less inheritance tax. Whereas IHT is usually payable at 40% over the nil rate band, if you leave 10% or more of your net estate to an established charity then you could benefit from the reduced rate instead. For more information about this contact one of the team.
For More Information
For more advice on the gifts to charity and what is involved please contact a member of our Wills, Trusts and Probate department. Bray & Bray have three main offices across Leicestershire, feel free to phone or pop in to talk to our solicitors.