Political leaders back legacy giving

Political party leaders David Cameron, Nick Clegg and Ed Miliband are the latest high profile names to back a campaign encouraging people to leave ten per cent of their estate to charity in their wills.

It was announced this month that all have pledged to leave at least ten per cent of their estates to charity as part of the Legacy10 campaign, launched last November ahead of a new inheritance tax incentive to be introduced in April. Other supporters include Sir Richard Branson.

The new rules mean that when ten per cent of an estate valued above the inheritance tax (IHT) threshold of £325,000 is bequeathed to charity, the IHT rate will be cut from 40 per cent to 36 per cent.

Robert Guilfoyle, managing partner at Guillaumes, who specialises in estate and tax planning and is a member of the Society of Trust and Estate Practitioners, said: “Charities that might potentially benefit from the Legacy10 campaign will no doubt be pleased by the high profile support it is attracting and any extra sources of cash for good causes will always be welcome.

“At the same time, anyone considering taking advantage of the reduced IHT rate from April needs to consider this in a wider context, as the size of their estate will affect the amount required for tax-efficient legacies and the impact on other beneficiaries.

“For example, an estate worth £361,000 would pay nothing in IHT if ten per cent of that – £36,100 – were given to charity, leaving a balance of £324,900.

“However, if no charity bequest were made from the same estate, even with the IHT being paid at the higher rate of 40 per cent, that would leave an additional £21,600 for other beneficiaries to share.

“Nevertheless, the reduced rate of IHT on charity bequests is certainly likely to be an option worth considering for many people already considering leaving money to good causes, so it could also prove to be a useful tax planning tool.”

For more information about how we can help you, please contact us.