Estate planning and charitable giving: The two can go hand in hand and be mutually beneficial for all concerned.
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The Covid-19 pandemic has brought into sharp focus how precious the freedoms we have are and, for many of us, our own health and mortality, leading to a review of many individuals’ estate planning.
A good deal of charities saw their income drastically reduce during the pandemic as fundraising activities were limited and individuals were understandably concerned about their own financial position at an uncertain time.
Post-pandemic, the ‘cost of living crisis’ is now really beginning to impact and it will almost certainly have a bearing on charities’ incomes going forward as many people tighten their purse strings once more.
This makes the importance of charitable giving within the context of estate planning even more important at this time, to enable charities to continue their vital work.
Estate planning: An overview of charitable gifting
Through various means over the years, the Government has sought to encourage charitable gifts in lifetime and charitable bequests under Wills by providing a range of tax reliefs to an individual or their estate.
Lifetime relief on charitable donations
In terms of lifetime planning, there is Gift Aid on donations, which enables charities to claim an additional 25 pence for each pound donated for a basic rate income tax payer. For higher or additional rate income taxpayers, the additional difference can be claimed via that individual’s Self-Assessment Tax Return or by asking HM Revenue and Customs (HMRC) to amend their tax code.
Gifts to a qualifying charity are free of inheritance tax and, in most cases with the right care depending on the non-cash asset being given, free of capital gains tax too (for example, if shares are gifted to a charity and these are then sold by the charity rather than create a capital gains tax issue for the individual when the shares are sold in their hands and then the cash proceeds are donated).
Gifting on death
For many individuals it is impossible to know exactly what you will need during lifetime in terms of assets and income, and this means that making provision on death for a charity via a Will is the best way to pass on larger cash sums or assets.
There are also inheritance tax reasons why leaving part of your estate to charity on death can be advantageous.
Firstly, the value passing to charitable from an individual’s estate is exempt from inheritance tax in the same way as a lifetime gift.
Secondly, if more than 10% of an individual’s net estate is left to charity on death, then the rate of inheritance tax applied to the remainder of the estate is 36% rather than the usual 40%. Great care is needed to ensure an estate qualifies for this reduced rate of tax and the charity meets the criteria (most registered charities in the UK and EU will).
Mutually beneficial
Whether a gift is made during lifetime or on death, as part of careful estate planning it is possible to ensure that larger sums donated to charity pass tax free towards supporting valuable charitable work and it can also be tax efficient for the individual concerned for the reasons outlined above.
The exact nature and benefit of tax relief(s) will depend on an individual’s personal circumstances. For the sake of the individual involved and the charity or charities benefitting, expert advice should be taken to ensure that the tax relief(s) for both parties will apply and are maximised when larger sums are involved.
As we come out of the pandemic and the cost of living soars, estate planning will be an important element in enabling individuals to continue to help charities weather the storm in difficult economic times by maximising what a charity receives in a tax efficient manner.
If you would like to discuss further, then please do contact us.
Dan Milano
Senior Associate, Private Wealth Team, Moore Barlow
Daniel.milano@moorebarlow.com Tel 01483 543210
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About Moore Barlow
Moore Barlow is one of the UK’s leading law firms, focused primarily on meeting the needs of private individuals & families, owners and leaders of fast-moving organisations and businesses, and people whose lives have been affected by serious accidents. major trauma or clinical negligence.
With 70 partners, 272 lawyers and legal professionals, and a total staff of nearly 500, Moore Barlow has offices in Southampton, Guildford, Woking and Lymington, as well as two locations in London (Richmond and the City).
At Moore Barlow, we focus on helping entrepreneurs and leaders of businesses and organisations, and private individuals and families through the opportunities, the challenges, and the sometimes life-altering circumstances that may come your way.
For us, it is all about starting a conversation and building a relationship between people who care about the outcome, rather than just between a ‘firm’ and a ‘client’. By understanding what’s at stake for you, be that as a business, organisation or as an individual, we can apply a personalised approach and the highest standards of care, so you get the best outcome for your specific needs.
In the commercial world, we help entrepreneurial businesses thrive in the long-term, and we also support individuals and families protect and transfer their wealth. Your immediate need is part of a complex whole. So we always assess the full context, making sure that we understand everything that’s going on in your life. Only by doing this can we make sure the solution fits the big picture and helps you achieve your long-term goals.
Putting our clients first
We don’t simply do the job in a vacuum, in the same way each time. Instead, we think about the best way for each individual person we’re advising. Often, you will need advice from different people in our firm who bring their expertise and experience to bear. Our firm is the right size to make this happen: we all know each other and work with each other all the time, so everything is coordinated and efficiently run. You’ll get a seamless team working on your behalf.
We know that your plans and aspirations are long-term. So our advice always takes this into account. We also build teams who work together so you will get to know us over time. You can only get the best advice within a long-term relationship and this is very much our bread and butter.
At Moore Barlow we are like you. We have our own dynamic growth business to run, and we too have families to support. This, combined with years of experience, means we completely ‘get’ what you need from advisors like us.
We are also proud of our open and communicative culture, which means you always know what’s going on and where you are in the process.
Disclaimer: This information is for guidance and should not be regarded as a substitute for taking full legal advice.
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Interested in partnering with the Community Foundation for Surrey?
We work with clients to help them to plan their legacy giving in a way that will continue to support local communities long after the original gift is given. Read more. For an informal chat about legacy giving, please contact:
Amy Lee, Fund Development Manager
01483 906383, amy@cfsurrey.org.uk
We also work with Professional Advisors such as Solicitors, Accountants, Financial Advisors and Wealth Managers to provide advice and support relating to the philanthropic needs of your clients. Read more.
To discuss partnering with us, please contact us at giving@cfsurrey.org.uk
