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Clients are often interested in ways to reduce Inheritance Tax and for anyone with a particular interest in the work of charities or who wishes to benefit charities after their death there are a couple of options to consider.

Firstly, the value of assets left to a charity will be deducted from your estate before Inheritance Tax on the remainder is calculated. For example, in basic terms if you have an estate liable to tax of £400,000 your estate will have to pay Inheritance Tax on £75,000 at the rate of 40% (£30,000). If you decide to leave say a £25,000 legacy to a charity, this is deducted from the value of the estate and so you will pay Inheritance Tax on £50,000 rather than on £75,000, a saving of £10,000.

Secondly, if you leave 10% of your assets to charity, the rate of Inheritance Tax will be lowered from 40% to 36%. There are a number of criteria which need to be satisfied to avail of this lower rate of tax and careful consideration needs to be given to the nature of your assets and how your Will would be drafted. The reduced rate of Inheritance Tax applies to the inheritance tax on the assets gifted to non charitable beneficiaries.

One or both of these options are worth considering if you have a desire to benefit charities after your death with the added bonus of a reduction in Inheritance Tax payable. If you wish to make a will incorporating gifts to charities please contact us for further advice.

 

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