Charitable bequest or inter vivos donation?

TheGreenFrog

My mother has very limited life expectancy.  Her estate will incur IHT charges on her death and she is comfortably a 40% income tax payer.  She wishes to leave money to charity and was thinking of doing this in her will.  But as she currently has more assets than she needs, it seems to me that it might be more tax efficient for her to make the donation while she is still alive (assuming of course that IHT rate or other relevant factors do not change in the upcoming budget!).  The donation will not be that large (would be much less than 10% of her net estate on death) and if made this year should be entirely eligible for gift aid and higher rate relief.  Am I correct that the inter vivos donation is more tax efficient?

TheGreenFrog

[Deleted User] said:

Purely from a tax perspective inter vivos is better:

1. Will: imagine giving £100 in the will.  Charity gets £100, no IHT to pay as 100% exemption on death. 

2. Lifetime: Ignoring cashflows, an inter vivos gift of £167 gross (£133 net) will cost £100 (after HR relief) and there will be no IHT to pay (as 100% lifetime exemption).  

Either way the net cost to the donor is £100 but wth lifetime giving the charity ends up with a lot more.

Lifetime is also simpler in that her will need not be changed, means the charity doesn't need to be involved in the estate and you get the satisfaction of knowing that the gift is happening now and making a difference now.

That is what I thought, thanks.  To put another way you could ensure charity got same amount (£100) in lifetime, which would decrease your estate by £60 and leave more money (even after IHT) for beneficiaries than ithey would have received on the will route.  Ignores potential return estate would have got had it not made lifetime gift, but for death shortly after gift it is immaterial.   

Brie

Not directly relevant perhaps but I've heard that if one gives a percentage of an estate to charity (rather than specifying the amount) the charity can be very fussy about maximising what they end up getting so can delay the sale of property etc.