Charitable Legacies in Wills
Charitable legacies in wills and gifts to charities within wills have been a big part of Will preparation and estate planning for some time now. Either from an inheritance tax (IHT) purposes to reduce the tax burden, or simply to support causes close to heart.
Different types of charitable legacies in Wills:
Pecuniary Gift
This is a fixed sum of money that can be left to charity.
Specific Gift
This is a particular asset being gifted, for example, a property, shares, jewellery, art, etc.
Residuary Gift
This is a percentage of your estate (or whole, if you wish). It is a share of what remains after all other gifts, debts, taxes, and testamentary costs have been paid.
A reversionary gift can also be made, whereby you leave an asset, for example, a property, to a friend or family member for their lifetime and, upon their passing, the property is passed to charity thereafter.
The “10% Rule”
Many people who wish to leave assets to charity, or wish to save on IHT, use the “10% rule”. This can allow people to gift to charity, but also allow the estate to pay less tax, meaning it is beneficial for everyone.
This means that the IHT rate is reduced from 40% to 36% if the estate leaves at least 10% of the net estate to charity.
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The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.
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