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Wills and Charitable Giving: A Powerful Combination for Estate Planning

Gresham Wealth

When it comes to estate and financial planning, much of the focus is often on ensuring your estate is effectively distributed amongst family members and that Inheritance Tax is mitigated. However, relatively little attention is given to incorporating charitable giving into your plans.

By aligning your philanthropic goals with your overall financial strategy, you can make a positive impact on society while achieving your personal financial objectives. Furthermore, by incorporating charitable giving into your estate planning, you not only have the opportunity to make a difference to the causes you care about, but there are also potential tax benefits. In this article, we will highlight some key considerations when making charitable donations part of your financial plan.

When it comes to charitable giving, a will allows you to allocate a portion of your estate to support the charitable organisations and causes close to your heart. By including charitable bequests in your will, you can leave a lasting impact on these organisations after you’re gone.

In addition to the satisfaction of giving back, charitable giving can also provide significant tax benefits. By including charitable bequests in your will, your estate may qualify for a charitable deduction, reducing the overall tax burden on your beneficiaries. Your donation will either be taken off the value of your estate before Inheritance Tax is calculated, or reduce your Inheritance Tax rate, if 10% or more of your estate is left to charity.

Many individuals of course choose to make charitable donations throughout life in support of various causes that resonate with them at various times and stages. If the donor declares themselves a UK taxpayer, Gift Aid will uplift the donation by 25p for every £1 given so the charity benefits even more. Higher rate taxpayers can claim back the difference between the tax paid on the donation and what the charity got back (a further 20%) via the self-assessment tax return.

Charitable giving can take various forms, including one-time donations, recurring contributions, funding a research grant, sponsoring local community initiatives or establishing a charitable trust or foundation. The latter method can allow for additional tax advantages such as income tax deductions and the potential for capital gains tax savings. It is crucial to consult with a financial adviser or tax professional to understand the specific tax implications of your charitable giving.

As your financial circumstances, personal goals, or philanthropic interests evolve, it’s important to regularly review and adapt your charitable giving strategy. It may be sensible to incorporate your charitable giving into your annual review with your financial adviser to ensure it is up to date and reflects any changes in your personal circumstances or charitable goals.

Incorporating charitable giving into your financial plans and estate planning not only enables you to leave a meaningful legacy but also provides certain tax advantages. By working with a financial adviser, you can ensure that your wishes are properly documented, and your charitable contributions have the desired impact.

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