What are the benefits of planning a legacy

There are many reasons for leaving gifts and legacies, either whilst living or as part of your Will. Mostly they fulfil personal wishes but increasingly nowadays people need to think smartly, given many complexities that exist in dealing with wealth and estates.

Here are some considerations:

  • Manage expectations – parents and their children (who expect to inherit) are needing to have inter-generational conversations on financial priorities and the wishes of each side, how the family wealth gets managed and thinking about after-life risks such as disincentives from large inheritances and family disputes.

  • Advice - Planning that includes legal and financial advice helps to manage the wishes of the giver and provide consistency, for example, between the provisions in a will, lasting powers of attorney and other beneficiary nominations such as pension funds.

  • Taxation – with longer living, growing property and assets wealth and complex taxation incentives, many people need to properly take into account tax matters that benefit themselves and the charity they donate to, such as:

    • Gift Aid – this benefits the charity and basic and higher rate taxpayers can get tax relief too.

    • IHT – this benefits the charity and basic and higher rate taxpayers can get tax relief too.

    • Gift Aid – Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died and is at 40% on the amount above a certain threshold. The estate can pay Inheritance Tax at a reduced rate of 36% on some assets if you leave 10% or more of the ‘net value’ to charity in your Will. So this benefits both the estate and the charity and be HMRC compliant.

    • Payroll Giving Schemes – Employees can donate to Company chosen charity from gross pay – thus you reduce income tax for basic and higher rate taxpayers.

    • Corporation Tax Relief – Corporate charity donations and sponsorship funds are normally deductible business expenses.

    • As a registered charity, One Kind Act is exempt from inheritance tax, capital gains tax and some aspects of income tax. These exemptions apply to legacy gifts and can increase the value of a gift at no cost to any other beneficiary (but you must always seek professional advice on any aspects of taxation of gifts).