We are often asked to include gifts to charities of all shapes and sizes in Wills for clients. There is no real pattern to giving save for the fact that most people have a long-term, personal or other connection with the chosen charity or organisation.
Some however use charitable giving to take advantage of the tax breaks available. For example, a person leaving 10% or more of their net estate to charity receive a reduction from 40% to a 36% rate of Inheritance Tax (“IHT”).
In order to establish if an estate will, at the time of executing the Will, benefit from the reduction the lawyer drafting the Will needs to be able to establish the Baseline Amount. This is effectively the value of the estate less the nil rate band available, exemptions to IHT and any reliefs, less charitable relief, applicable. It is therefore essential that the person drafting the Will has knowledge of the application not only of the law when drafting the Will but also how it is then applied when carrying out the terms of the Will, i.e. after the testator has died.
There are also other ways you can give to charity to reduce or remove IHT liability including, for example, allowances for ‘in life’ giving. If your Will includes business or agricultural assets it is also essential that these are factored into your Will as specific reliefs may be applicable. We regularly advise clients on this area of tax planning.
We see cases where as a result of poor drafting by unqualified/unregulated Will writers or even other solicitors, a testator’s intentions in a Will have not been realised. This can also result from changing circumstances which have then not been reflected in a revised Will.
If you wish to discussed estate planning, in life gifting, trusts or the estate of a deceased testator where inheritance tax is an issue, please contact us.
Martin Cooper heads our Private Client team.
Image by Lucas Hayas under a creative commons licence.