A testator intended to leave 10% of her net estate to charity to benefit from reduced rate IHT. The will was drafted to include the following clause:-
“I give 10% of my estate (before the payment of legacies) to my Trustee upon trust for such charitable object… and I DECLARE that if inheritance tax is payable in respect of my estate the above percentage share is to apply to the net value of my residuary estate after the payment of inheritance tax and shall be appropriately adjusted to achieve this result.”
This is an estate of approximately £1.3 million with a full NRB and no RNRB. There are further 19 pecuniary legacies ‘free of tax’ totaling £912,000.
The first part of the clause is straight forward - although there will be insufficient funds to pay the legatees in full.
The second part of the clause complicates matters. 10% after the payment of inheritance tax will not satisfy requirements for reduced IHT. In addition, the charitable gift will have suffered IHT.
The will writer has offered to do a deed of variation to remove the second part of the charitable gift clause; however, all pecuniary legatees will have to agree as it will change their abated gifts.
Any advice on how best to proceed would be greatly appreciated - in particularly, the legacies will have to suffer the tax as there will be no residue - does this mean the tax will have to be apportioned between them?