Last Will and Testament

We always stand ready to help Charities in their fund raising drives, but this could improve things radically in the future:

Proposals made as far back as 2004 to introduce  ‘”Lifetime Legacies’ have been reconfirmed recently to change the way that potential givers to charity can ensure their gift is received on their death without compromising their income. Charitable Remainder Trusts (CRTs) have been used in the United States for many years as a tax effective way to secure future funds for a charity. The trust, created by the donor during their lifetime, gives a clear and irrevocable commitment that the property contained within the trust will pass to the chosen charity on their death. Because the charity can rely on this future gift this impacts on their ability to raise finance and commit to capital expenditure in the security that the funds would be forthcoming. The trusts are established by the donor making an irrevocable gift of assets, such as shares or a second property, into a charitable trust for the remainder of their life from which they receive income. Although CRTs can currently be established in the UK their tax treatment does not recognise that the gift is irrevocable so there is little incentive in making planned gifts of this nature. The current taxation situation penalises the use of these trusts and favours the use of a legacy on death. The proposals that have been put forward would exempt the gift into trust from both CGT and IHT; bringing the treatment into line with the general philosophy of tax free charitable giving. The proposals would mean that the capital is held on trust during the donor’s lifetime and all income is paid to the donor. This is an effective way to secure assets for charity without losing an income stream for the donor. The donor would pay tax on this income, subject to any deductions. The gift into trust would qualify for CGT relief given that the settlor will have irrevocably given away his entire interest in the capital for charitable purposes. This proposal would match the CGT implications of giving a legacy as the assets would be subject to a tax ‘uplift’ on death meaning, on the death of the donor, the assets (along with any income accumulated after the death of the donor) would pass to the chosen charity or charities without Capital Gains Tax being payable. The passing of assets from the trust will not be taxed for IHT either as it will be exempt under s23 of the Inheritance Tax Act 1984.Informal research has concluded that the introduction of CRTs in the UK would appeal to a large group of potential charitable donors. They are particularly targeted at those who are ‘comfortable’ rather than the ‘wealthy’ and who may wish to give assets to charity but still require a guaranteed income to support their lifestyle and may be nervous about giving assets outright in case they need the income in the future. This is especially important in the current climate where worries of pension provision and increasing care costs are prevalent. It will now be a case of ‘wait and see’ as to whether the Government will act on these proposals which have received support from charities such as Cancer Research UK, Oxford University and representatives from large solicitors firms.

‘Planned Giving’ the future for Charities?

From the Society of Will Writers