As the saying goes, you can’t take your money with you when you die, so it’s only natural that you might want to leave your wealth to those people closest to your heart, such as your children.
But this isn’t the only option open to you, as you can leave your money to a cause that means a great deal to you – and this can have significant benefits when it comes to inheritance tax.
Any gifts you make to charity are exempt from inheritance tax, so if you leave everything to a good cause, your estate wouldn’t have to pay it at all. However, very few people take up this option, as many will still want to leave a generous amount to loved ones.
But even in that case, there are still inheritance tax benefits to be had. If you bequeath more than a tenth of your estate to charity, the total amount of inheritance tax the estate pays will be 36 per cent, lower than the standard rate of 40 per cent on everything over £325,000, or £650,000 for a married couple.
Support a Cause You Care About
Donations made from people’s Wills can be a valuable source of income for countless charitable bodies, so if you want to explore this option, it’s worth spending time thinking about what cause or causes matter to you.
If you’re an animal lover, maybe a national or local animal charity could be a good option.
If you or a loved one has struggled with a long-term illness, such as cancer, you might want to donate to a charity that helps others with that condition, or perhaps a hospice that cares for those with terminal illnesses.
You might even want to support a museum or another cultural institution, or maybe a local community group.
The choice is yours, which means that your Will gives you a great opportunity to leave a positive legacy in an area you care about, or say thank you to a charity that has helped you personally or supported a loved one.
Speak to Your Family and Get Financial Advice
Before you write or update your Will with a view to leaving a gift to a charity, it might be worth speaking with members of your family beforehand.
Many of your family members might be hoping or expecting to receive an inheritance from you, so explaining the reasons behind your decision can help to prevent any upset or family disputes further down the line.
You should also consider speaking to a financial adviser if you are thinking of gifting to charity as part of your estate planning, so they can discuss the inheritance tax implications with you.
A regulated, professional adviser will also be able to talk you through other ways of making sure your estate planning is more tax-efficient.
What Can I Leave to Charity?
You can leave either a set amount of money or a particular item to your charity of choice. Alternatively, you can ask the executor of your estate to take care of awarding a set sum to a charity after other costs have been paid out and gifts to family members distributed.
It’s often said that the only two certainties in life are death and taxes, but with careful planning, there’s no reason why you can’t reduce your inheritance tax bill and leave a positive legacy behind. Please don’t hesitate to get in touch with us if you have any questions about making your estate more tax-efficient.