Many people opt to include charitable bequests in their Will. There rate of inheritance tax for example if at 36% when gifts to charity represent 10% or more of the estate.
| Bequest below 10% (D) | Bequest above 10% (D) | |
| Net value of estate before bequest | 1,000,000 | 1,000,000 |
| Deduct: Charitable bequest | 0 | 100,000 |
| Net estate liable to IHT | 1,000,000 | 900,000 |
| Deduct: IHT exemption | 325,000 | 325,000 |
| Liable to IHT | 675,000 | 575,000 |
| Deduct: IHT @ 40%/36% | 270,000 | 207,000 |
| Net estate for distribution | D730,000 | D693,000 |
Thus in the above example, charitable causes benefit by D100,000 while the IHT reduces by D63,000 and the net amount available for distribution is only reduced by D37,000.
If you leave 10% or more of your estate to charity your rate of IHT reduces from 40% to 36%. Is now the right time to prepare or update your Will? Please contact us to discuss the planning options available to you.
