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Charity and Trusts

Charity

Anything left to charity in your Will won’t count towards the total taxable value of your estate. Known as a ‘charitable legacy’, this will also reduce the IHT rate on the rest of your estate from 40 per cent to 36 per cent, as long as you leave at least 10 per cent to charity. 

Trusts

Trusts can play a role in reducing a family’s exposure to IHT so that more can be passed on to future generations, they can also help look after family assets and provide for family members who are too young or vulnerable to deal with financial matters. 

A trust is a legal arrangement where you gift cash, property or investments to a separate entity (the trust). The person who gifts assets is the Settlor, the trustees then oversee the management of the assets for the benefit of a third party or parties.

One of the main benefits of a trust is that, should you elect to act as the trustee, you would continue to maintain control over the assets gifted whilst your estate’s exposure to IHT is reduced as, after seven years, the gift is out of the Settlor’s estate completely.

Assets transferred into a trust are no longer considered as belonging to the Settlor, so they are taxed according to the rules governing the trust.

Many people would prefer to provide for a beneficiary through a trust as opposed to passing assets to them outright. This could involve a source of income for a beneficiary for life, or providing education for children but not allowing them to access funds until they are older.

https://stca.co.uk/services/individuals/inheritance-tax/