New Incentive for Legacy Donors
Howard Lake | 24 March 2011 | Blogs
In this week’s budget, the Chancellor has handed legacy fundraisers a gift by incentivising legacies as a form of donation.
Although he left the inheritance tax nil rate band frozen until April 2015 (which might be seen as mean spirited), he did announce that a reduced rate of inheritance tax (IHT) will apply where 10% or more of a deceased’s net estate (after deducting IHT exemptions, reliefs and the nil rate band) is left to charity. In those cases the current 40% rate will be reduced to 36%. The new rate will apply where death occurs on or after 6 April 2012.
What this means is that legacy fundraisers now have a new “donor motivator” to use in their campaigns.
The proposition is that “if you leave this charity a legacy of 10% of your estate, you will benefit from a 10% reduction in your inheritance tax rate”.
Although this sounds better than it really is in financial terms (as 10% of the net estate after deductions will of course be more in cash terms than the reduction in IHT) it should still be a valuable incentive for those people motivated by a desire to pay less tax.
On its own, this move is unlikely to result in a huge growth in legacy giving, but it is nevertheless a useful addition to the legacy tool box and, for some people, should be enough to persuade them that a legacy is worth considering. It may also encourage more professional advisers to raise the issue of charitable legacies with their clients as a tax saving device.
At a tactical level, it does now give legacy fundraisers another reason to talk to donors about legacies and to update them on the latest rules. We all need to make the most of this opportunity!
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.