Jackson Barrett and Gass are talking part in the East Cheshire Hospice Will Week. Throughout the week beginning 6th October 2014, Jackson Barrett and Gass will waive their fee for regular Wills in return for clients making a contribution to the Hospice.
When considering leaving a Legacy to charity, a recent Inheritance Tax rules change makes it now possible to;
1) Pay less Inheritance Tax
2) Give more money to charity
3) Give more money to loved ones
Inheritance Tax changes usually involve closing existing loopholes in order to maximise HMRC revenue, for example, closing the loophole that allowed parents to give their property to their children and avoid paying Inheritance Tax (if they survived for 7 years or more after making the gift). However, in return for closing existing loopholes, HMRC decided to reduce the Inheritance Tax rate to 36%*.
However, in order to qualify for the reduced rate, a person must leave at least 10% of their net Estate (amount left after exemptions and allowances) to charity.
If a person has an Estate worth £500,000** and they decide to leave between 4% and 9% of their net Estate to charity, it would be beneficial to increase the amount passing to charity to 10%. This is because the tax rate is reduced to 36% if more than 10% of the net Estate is left to charity. This reduction offsets the extra amount given to charity and means more money is available for the other beneficiaries.
An example is given below and shows how doubling the amount given to charity (e.g. East Cheshire Hospice) can result in more money being given to a person’s loved ones (in this case, their children).
Gift to East Cheshire Hospice £25,000 (5%)
Gift to Children £285,000
Inheritance Tax at 40% £190,000
Total £500,000
Gift to East Cheshire Hospice £50,000 (10%)
Gift to Children £288,000
Inheritance Tax at 36% £162,000
Total £500,000
* If more than 10% of the net Estate is left to charity
** This figure does not include the Nil Rate Band (tax free allowance) that is available to most people.
Gifts to charities are completely exempt from Inheritance Tax. Therefore, when you are thinking about making a Will and considering how much to leave to charity; remember, it may be possible to give more to your loved ones by giving more to charity.
Fiona Beasley, Legacy Marketing Manager, said “Gifts from Wills are so important to the Hospice and are a major element of the voluntary income we receive. It is good to know that people good enough to think of us in this way can also enjoy tax efficient benefits.”
Wills & Probate specialist, Paul Clark, said “This is a very effective way of reducing Inheritance Tax and should be considered by people wishing to benefit a charity whilst maximising the funds available to other beneficiaries. Despite its complexities, it is a great weapon to have in the Estate planning arsenal.”
For more information about the East Cheshire Hospice & Will Week, visit www.eastcheshirehospice.org.uk/willweek or contact 01625 666991.