Hilary Homfray joins Anthony Collins Solicitors after working for Birmingham City Council for 14 years. With more than 60,000 properties, she was kept busy!
A recent change to the law will hopefully have the effect of encouraging even more charitable giving. Charitable legacies remain exempt from Inheritance Tax but the change means that if 10% of an estate is left to charity, the rate of Inheritance Tax is reduced from 40% to 36%.
The starting point for calculating how the 10% reduction works, is dividing up an estate in to three components: trust property, assets passing by survivorship and a general, residuary component. Once reliefs are deducted or exemptions applied (eg. the available nil rate band), it is then necessary to calculate whether 10% has been left to charity. A Will therefore needs to be properly drafted to take advantage of this reduced rate.
Not only will the charity benefit from receiving a legacy but family and friends benefitting under the Will could receive increased legacies as a smaller amount of tax will be due. In fact, someone leaving 4% of their estate to charity will now find that they can increase that legacy to 10% and their family will still inherit the same amount.
Whether or not significant numbers of people take advantage of the change is largely dependent on whether charities promote it amongst their supporters. Supporters who have already included a gift to charity may want to review their Wills to see whether not only the charity but other beneficiaries would inherit more if the charitable gift was increased. Supporters who have not included a charitable gift or have not yet prepared a Will, may be keen to learn that leaving a legacy to charity may not impact on their family’s inheritance as much as they may think.
For more information
For further information on how the 10% charity reduction works or if you are interested in promoting this amongst your charity supporters, please contact Sophie Fenn on 0121 214 3642 or by email email@example.com.
 Law Society Charities As Beneficiaries Third Edition
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