Making a Will is an important part of planning for the future and, for most, is hugely important in ensuring that their family and friends are provided for.  It can also be an opportunity to remember those less fortunate and indeed legacies under a Will represent a major source of funding for a great range of charities.  Whilst leaving a set sum of money or a share of your estate to a charity is in itself a fulfilling act, it can also have financial benefits for your beneficiaries.

The current Inheritance Tax threshold (commonly referred to as the ‘nil rate band’) is £325,000 per person (£650,000 per married couple) meaning that if your estate exceeds this figure the excess is very likely to be taxed at 40%.   Any property that passes to your spouse or to charity usually passes tax free.  In addition, if you have left 10% or more of your taxable estate (meaning the amount left after the nil rate band has been deducted) the inheritance tax charge on the rest of your estate is reduced to 36%.

This can mean, in certain situations, that if you increase what you plan to leave to charities, your beneficiaries actually receive more.  Take, for example, an estate worth £1 million.  If the testator had left 7% of his taxable estate to charities and the remainder to family then the charities would receive in the region of £47,250 and the family would receive £701,650.  If, however, the Will provided that 10% was left to charities then the charities would receive £67,500 but the family inherit £713,800 as less tax has been paid.

It is also important that if you plan to divide your estate between charitable and non-charitable beneficiaries, care be taken in the Will to clearly set out who bears the cost of any tax that might be due (i.e. should all the beneficiaries receive the same or should the charities receive their share before the tax is then deducted) as this can have an impact on the amount of tax due.

More importantly, the choice of which, if any, charities are to be included can be daunting due to the number and range in existence.  We would look to work closely with you to ensure that your intentions are expressed clearly, all the tax implications are examined and understood and that your estate will be administered in the way you would want.