Intergenerational Planning

Most people don’t know that if they leave 10% of their estates to charity above the available reliefs such as the nil rate band (currently £325,000 per person) the inheritance tax rate drops to 36% instead of 40%.

This means that your chosen charities get money and HMRC receive less. There is even a sweet spot where if you have the 10% clause, the charities get money, HMRC gets less and your beneficiaries receive more than they originally would.  This all depends on the size of your estate.

If you don’t know which charities you want to leave it to, you can leave it to your trustees’ discretion or set up a Charities Aid Foundation Trust into which the 10% is paid – which allows the funds to be distributed over time and depending on the circumstances, and the Charities Aid Foundation agreeing, may allow you to receive the charity relief to go to charities which might not be eligible for the relief if funds were left directly, e.g. they are not left to a UK charity.

If someone has left money to charity in their estate but it does not reach 10% the beneficiaries may wish to do a DEED OF VARIATION within two years of the death, to up the gift to charity to take advantage of the 36% rate.  I have done this for clients on a number of occasions.