Will planning

poppystar

SevenOfNine said:

Do you have property, if so there's the Residence Nil Rate Band as well.

My mum's will specified that I got 'all her jewellery' (I have 2 brothers). Seemed a bit unfair as value is several thousand, but there has been no bad feeling because her will was clear.

Personally, I'd consider being specific about your most personal, sentimental items (for me that was mum's wedding, eternity, engagement rings & charm bracelet my dad bought her), but perhaps not the rest.

Deal with what's left in a letter of wishes, which hopefully will be followed, because it's less important if it's not.  

Our own current wills refer to our letter of wishes, revised a few times & kept with our wills, to be followed....or not! 

Yes to property but no to RNRB as no qualifying beneficiaries.

My current Will says jewellery to be shared between x and y in equal shares, which I guess means them deciding between themselves who wants what. I think I may well do that again. It’s mainly my grandmother’s and my mother’s rings that I feel it might be nice to give to distant family girls although they may not feel it significant themselves. It will also 
mean I don’t have to decide which of them gets which or figure out how to describe each piece in detail as there is  no one else who is aware of that.

I need to draft a letter of wishes as I go along I think so I’m clear what I want. You say your Will refers to the letter of wishes. Does that give it a different status to one just left for executors to find? And is it stored with your Will at the solicitors or with your copy at home? 

poppystar

Keep_pedalling said:

To counter the argument about leaving a percentage to charities there are some very good reasons for doing so in some circumstances. The first being if you have a large estate and want to reduce the amount going to HMRC via a charitable donation then a 10% or higher it going to be needed.

For smaller estates a specified sum to a charity (or anyone come to that) could mean very little or none makes it to your residual beneficiaries. For example if when I write my will I leave £20k to charity (or Joe Bloggs) and the rest of my £300k estate to my children, but then spend 4 years in care without the mental capacity to change my will the charity or Joe would still get the £20k and my children a lot less or nothing.

I think in reality if you leave a percentage and your executor carries out their duty in a competent fashion then they are not going to have problems from the charity, but if you are worried about it do what we do give more while in the land of the living and a small gift in your will.

Can you clarify the 10% bit please.

My understanding was that charitable requests were deducted before any tax was calculated and hence the tax saving on them is the full 40%. Where does the 10% arise? 

With respect to the smaller estate example as the plan is for all bequests to be pecuniary with a small residual (Will updated regularly!) then it is the abatement rules that will be brought into play I guess? Will have a look at the link you gave @Langtang  , thanks.


On the latter point I still have a fear of running out of money so don’t want to give more than I do to charities at the moment! Also if I go under the proverbial bus very soon the Will needs to reflect that and the amount I won’t have had time to donate and the value of the property. So for the moment there will be relatively significant sums involved. 

Edit: just looked at gov.uk and it says the following

Your donation will either:

• be taken off the value of your estate before Inheritance Tax is calculated
• reduce your Inheritance Tax rate, if 10% or more of your estate is left to charity

What it doesn’t say it which will be applied when - so am frankly more confused 

getmore4less

The HMRC manual covers the charitable deductions to qualify for the lower rate(36%) on the taxable bit.


https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45001

to claim you use this form
https://www.gov.uk/government/publications/inheritance-tax-reduced-rate-of-inheritance-tax-iht430

Its a good Idea to run through the IHT forms while alive to check you have not missed anything rather than leave a mess for your executors.



Where there is the risk of lack of funds put the charities down the list or use clauses that they only get something if there is enough.

Keep_pedalling

poppystar said:

Keep_pedalling said:

To counter the argument about leaving a percentage to charities there are some very good reasons for doing so in some circumstances. The first being if you have a large estate and want to reduce the amount going to HMRC via a charitable donation then a 10% or higher it going to be needed.

For smaller estates a specified sum to a charity (or anyone come to that) could mean very little or none makes it to your residual beneficiaries. For example if when I write my will I leave £20k to charity (or Joe Bloggs) and the rest of my £300k estate to my children, but then spend 4 years in care without the mental capacity to change my will the charity or Joe would still get the £20k and my children a lot less or nothing.

I think in reality if you leave a percentage and your executor carries out their duty in a competent fashion then they are not going to have problems from the charity, but if you are worried about it do what we do give more while in the land of the living and a small gift in your will.

Can you clarify the 10% bit please.

My understanding was that charitable requests were deducted before any tax was calculated and hence the tax saving on them is the full 40%. Where does the 10% arise? 

With respect to the smaller estate example as the plan is for all bequests to be pecuniary with a small residual (Will updated regularly!) then it is the abatement rules that will be brought into play I guess? Will have a look at the link you gave @Langtang  , thanks.


On the latter point I still have a fear of running out of money so don’t want to give more than I do to charities at the moment! Also if I go under the proverbial bus very soon the Will needs to reflect that and the amount I won’t have had time to donate and the value of the property. So for the moment there will be relatively significant sums involved. 

Edit: just looked at gov.uk and it says the following

Your donation will either:

• be taken off the value of your estate before Inheritance Tax is calculated
• reduce your Inheritance Tax rate, if 10% or more of your estate is left to charity

What it doesn’t say it which will be applied when - so am frankly more confused 

If you give 10% of your estate to charity it lowers the 40% IHT rate on any remaining taxable part of the estate to 36%. 

If your aim is to avoid giving any of your estate to HMRC, then you have the option of leaving the exempt part of your estate to friends & relatives with the residual to charity.

poppystar

Keep_pedalling said:

poppystar said:

Keep_pedalling said:

To counter the argument about leaving a percentage to charities there are some very good reasons for doing so in some circumstances. The first being if you have a large estate and want to reduce the amount going to HMRC via a charitable donation then a 10% or higher it going to be needed.

For smaller estates a specified sum to a charity (or anyone come to that) could mean very little or none makes it to your residual beneficiaries. For example if when I write my will I leave £20k to charity (or Joe Bloggs) and the rest of my £300k estate to my children, but then spend 4 years in care without the mental capacity to change my will the charity or Joe would still get the £20k and my children a lot less or nothing.

I think in reality if you leave a percentage and your executor carries out their duty in a competent fashion then they are not going to have problems from the charity, but if you are worried about it do what we do give more while in the land of the living and a small gift in your will.

Can you clarify the 10% bit please.

My understanding was that charitable requests were deducted before any tax was calculated and hence the tax saving on them is the full 40%. Where does the 10% arise? 

With respect to the smaller estate example as the plan is for all bequests to be pecuniary with a small residual (Will updated regularly!) then it is the abatement rules that will be brought into play I guess? Will have a look at the link you gave @Langtang  , thanks.


On the latter point I still have a fear of running out of money so don’t want to give more than I do to charities at the moment! Also if I go under the proverbial bus very soon the Will needs to reflect that and the amount I won’t have had time to donate and the value of the property. So for the moment there will be relatively significant sums involved. 

Edit: just looked at gov.uk and it says the following

Your donation will either:

• be taken off the value of your estate before Inheritance Tax is calculated
• reduce your Inheritance Tax rate, if 10% or more of your estate is left to charity

What it doesn’t say it which will be applied when - so am frankly more confused 

If you give 10% of your estate to charity it lowers the 40% IHT rate on any remaining taxable part of the estate to 36%. 

If your aim is to avoid giving any of your estate to HMRC, then you have the option of leaving the exempt part of your estate to friends & relatives with the residual to charity.

It’s the ‘either’ bit that I’m having problems with. I would have thought it was an ‘and’?

Simple (hopefully) example:

say estate is £500k
charitable bequests £60k ie over 10% of value of estate

if ‘either’ is there a choice?
logically it should in my mind be ‘and’

ie. no iht on charity part so that £60k exempt 
then as that is over 10% of estate then the iht on remainder 65k (500k - 60k - 325k) is at 36%

Keep_pedalling

poppystar said:

Keep_pedalling said:

poppystar said:

Keep_pedalling said:

To counter the argument about leaving a percentage to charities there are some very good reasons for doing so in some circumstances. The first being if you have a large estate and want to reduce the amount going to HMRC via a charitable donation then a 10% or higher it going to be needed.

For smaller estates a specified sum to a charity (or anyone come to that) could mean very little or none makes it to your residual beneficiaries. For example if when I write my will I leave £20k to charity (or Joe Bloggs) and the rest of my £300k estate to my children, but then spend 4 years in care without the mental capacity to change my will the charity or Joe would still get the £20k and my children a lot less or nothing.

I think in reality if you leave a percentage and your executor carries out their duty in a competent fashion then they are not going to have problems from the charity, but if you are worried about it do what we do give more while in the land of the living and a small gift in your will.

Can you clarify the 10% bit please.

My understanding was that charitable requests were deducted before any tax was calculated and hence the tax saving on them is the full 40%. Where does the 10% arise? 

With respect to the smaller estate example as the plan is for all bequests to be pecuniary with a small residual (Will updated regularly!) then it is the abatement rules that will be brought into play I guess? Will have a look at the link you gave @Langtang  , thanks.


On the latter point I still have a fear of running out of money so don’t want to give more than I do to charities at the moment! Also if I go under the proverbial bus very soon the Will needs to reflect that and the amount I won’t have had time to donate and the value of the property. So for the moment there will be relatively significant sums involved. 

Edit: just looked at gov.uk and it says the following

Your donation will either:

• be taken off the value of your estate before Inheritance Tax is calculated
• reduce your Inheritance Tax rate, if 10% or more of your estate is left to charity

What it doesn’t say it which will be applied when - so am frankly more confused 

If you give 10% of your estate to charity it lowers the 40% IHT rate on any remaining taxable part of the estate to 36%. 

If your aim is to avoid giving any of your estate to HMRC, then you have the option of leaving the exempt part of your estate to friends & relatives with the residual to charity.

It’s the ‘either’ bit that I’m having problems with. I would have thought it was an ‘and’?

Simple (hopefully) example:

say estate is £500k
charitable bequests £60k ie over 10% of value of estate

if ‘either’ is there a choice?
logically it should in my mind be ‘and’

ie. no iht on charity part so that £60k exempt 
then as that is over 10% of estate then the iht on remainder 65k (500k - 60k - 325k) is at 36%

That is correct, any charitable bequests are exempt, and going over 10% reduced the tax on any non exempt bequests.

74jax

Regarding jewelery and specifics, I've listed all these in my Will, not a letter of wishes.

I have some very expensive jewellery (and some not so) that I have listed to go to my daughter so not to end up in the part with random belongings. 

I've also left such a random item as a cardigan to a friend (who even jokes 'I'm still getting the cardigan aren't I?) so it's all clear exactly who I want to get what and isn't just a 'wish' of mine.