Giving to charity through your will
If you’re considering writing or updating a will, it’s worth knowing that leaving gifts to charity not only helps good causes, but could also reduce your Inheritance Tax (IHT) rate.
There are several options for those who do want to leave a gift to a charity in their will. For example, you can either give a fixed amount, or you may decide to donate some of your possessions. Alternatively, you may simply decide to give whatever is left after you’ve distributed everything else to your loved ones or dependents.
The tax benefits of giving to charity
As well as providing a financial benefit to the charity, leaving a gift to good causes may help you to legitimately reduce the amount of IHT payable when you die.
Under current tax rules, IHT is payable at a rate of 40% on the value of your estate which is above the current IHT threshold of £325,000 (for the 2017-18 tax year). However, gifts left to charity are completely free of IHT, and if you leave at least 10% of your net estate to charity, you can cut the IHT rate on the rest of your estate from 40% to 36%.
Remember that tax rules can be complicated and often change over time, so it’s a good idea to seek professional advice based on your individual circumstances before proceeding.
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Benefits of writing a will
Having a will in place can provide valuable peace of mind that everything you own will go to exactly who you want, whether that’s family, friends, your favourite charity, or a combination of these.
If you don’t have a will when you die, then your assets will be distributed according to what are known as ‘intestacy laws’, so you won’t have a say in who gets what. For example, if you’ve lived with a partner for many years, but you aren’t married or in a civil partnership with them, then under these rules, they won’t legally be entitled to any of your possessions.
Writing a will also enables you to put down on paper what sort of send-off you’d like when you die, so that your family or loved ones aren’t left worrying about not giving you the funeral you would have wanted.
Remember…
Our circumstances often change over time, so if you wrote a will many years ago, think about whether it may need updating. You don’t necessarily have to re-write the whole thing. You may be able just to write a ‘codicil’ which you keep alongside your will. This is basically an addition or amendment to your will, and must be signed and witnessed in the same way.