Charitable Legacies with Stamford’s Buckles Law
Many charities depend on the generosity of individuals who wish to remember their cause in their wills. Across borders the legal position is a little more tricky to navigate, but fortunately, legal practice Buckles Law has a team of experts in the UK and across Europe
Leaving a legacy to a charity can be a powerful way to make a lasting impact, but it also involves navigating a complex web of legal and tax considerations, especially when several countries are involved.
As individuals increasingly seek to align their financial planning with their philanthropic goals, understanding this framework becomes essential to avoid most of the value of this legacy being lost to inheritance tax and formalities.
In the UK, there are several reasons why someone may benefit a charity in their Will:
The ability to benefit good causes; Any gifts to charity are free of UK inheritance tax (IHT); and if at least 10% of the net estate passes to charity then IHT is paid on the remainder of the estate at the reduced rate of 36% (instead of 40%).
Prior to 15th March 2023 the charitable exemption extended to EU charities, which was attractive to anyone who had Anglo/French cross-border estates and wished to leave a portion of their French estate to an EU charity and still qualify for the UK IHT exemption.
This door has now been shut so that the UK IHT exemption only applies to UK charities.
This therefore creates complexities for anyone who has a cross-border estate but wishes to benefit a charity.
Take for instance, Mrs Bloggs, a British national domiciled in the UK for IHT purposes who also owns a French holiday home. She would like to leave her worldwide estate to charity.
As Mrs Bloggs is UK domiciled for IHT purposes, her worldwide estate will be declarable to HMRC and fall within the remits of UK IHT on her death.
The issue for Mrs Bloggs is that if she is to leave her French estate to a French registered charity (in order to potentially qualify for a French IHT exemption), this portion of her estate will not meet the charitable exemption in the UK.
This will mean that UK IHT will be payable on the share of her estate which passes to the French charity.
There is a double taxation treaty between the UK and France, however this only applies if there is tax paid on the same asset in both countries.
This would therefore not apply in this instance as there would not be any IHT in France on the share left to the French charity.
From a French perspective, not every French registered charity (association caritative et fondations) will be allowed under French law to receive legacies and further, not every charity will benefit from an exemption of French IHT, with strict requirements applying. In some circumstances French IHT as high as 60% could be due on the legacy.
Some EU registered charities may be able to benefit from a full French IHT exemption, however, since Brexit this no longer applies to UK registered charities and therefore any French assets left to a UK registered charity will always be taxed at the 60% rate.
In addition to the high tax threshold, legacies to non-French registered charities must be authorised by the French government which is a lengthy and expensive process.
Let’s take the example of Mr Blog. He is a British national but domiciled in France for IHT purposes as he moved there on retirement. He owns assets both in France and in the UK and he would like to leave some of his estate to charity under his Will.
If he leaves any of his assets to a UK registered charity, the UK charity will need to apply for authorisation to receive the legacy and pay 60% French IHT. When adding up the tax and costs of administration, the UK charity will not receive that much at the end of the day.
If he leaves all his assets to a French registered charity that meets the exemption requirements, then no French IHT is due, but there would be IHT due in the UK for the UK assets being left to the French registered charity.
In summary, leaving a legacy to a charity not only reflects your values but also requires careful legal planning to ensure your intentions are fulfilled. By understanding those nuances and engaging with professionals, you can create a meaningful impact that resonates for generations to come.
For more professional services providers, see our February edition online at https://issuu.com/pridemagazines/docs/stamford_pride_february_2025
Buckles Law is a multidisciplinary legal practice for individuals and families, business and corporate clients, both in the UK and Europe. Buckles Law’s specialisms include family law, wills and estate planning, tax planning and wealth preservation, powers of attorney and estate administration, as well as commercial property, employment and contract law.
The company has offices in Stamford, Bristol, Cambridge, London, Nottingham, Peterborough, Swindon, Milan and Paris. Call 01780 484570 or see www.buckles-law.co.uk.