At KhanMather, we understand that planning for the future and ensuring your wishes are honoured is of utmost importance. A common concern for many is inheritance tax (IHT), and how to manage it effectively. If you’re considering leaving a portion or all of your estate to charity, you’ll be pleased to know that UK law offers significant benefits.
Key Takeaways:
• Gifts to Charity are IHT-Free: Any amount you leave to a registered charity is completely exempt from inheritance tax. This means the full value of your donation goes to the cause you care about.
• Reduced IHT Rate: If you leave 10% or more of your net estate (the value after deducting the nil-rate band and any other reliefs and exemptions) to charity, the standard IHT rate on the remaining taxable portion reduces from 40% to 36%. This can result in a substantial saving for your beneficiaries.
• Capital Gains Tax (CGT) Exemption: If an asset in your estate increases in value between the date of death and its sale, there may be a CGT liability. However, charities are exempt from CGT. Therefore, gifting an asset to charity before its sale can reduce the overall tax liability of your estate.
• Proper Will Drafting is Crucial: To ensure your wishes are carried out and to minimize the risk of your will being challenged, it’s vital to have a properly drafted will. Discuss your plans with your loved ones to avoid potential disputes.
• Deed of Variation: A Deed of Variation allows beneficiaries to redirect their inheritance, potentially offering tax advantages. If someone inherits assets they don’t need, gifting them to their children via a Deed of Variation can bypass the usual 7-year rule for inheritance tax.
Example:
Imagine you are 70 years old with an estate worth £530,000 and wish to leave your wealth to charity. In this scenario, the entire amount left to charity would be exempt from inheritance tax.
Important Note: Special rules apply. It’s crucial to seek professional legal advice when planning your estate, particularly when considering charitable giving.
How KhanMather Can Help:
Our experienced team at KhanMather can provide expert guidance on all aspects of estate planning, including inheritance tax and charitable giving. We can help you:
• Draft a will that accurately reflects your wishes.
• Advise on the most tax-efficient ways to structure your charitable donations.
• Ensure your estate plan is fully compliant with UK law.
Contact Georgina today on 0161 850 9911 for a consultation to discuss your specific circumstances and create a plan that secures your legacy and supports the causes you value.