Charities and nil rate band

[dzug]

I understand that bequests to charity effectively increase the deceased's nil rate band by their amount.

In practical terms what happens if the charity doesn't (yet) exist? That is the bequest is to set up a charitable fund. Is the IHT deferred until the charity is set up, or is it paid and reclaimed later? If so by whom? Or paid and not reclaimable?

[Barmaid]

dzug, I think this is one of the most complicated questions ever on here, albeit a relatively simple answer!!

Assuming the bequest is to set up the Joe Bloggs Charitable Foundation for Distressed and Disturbed ABers. Assuming that this is a charitable object (some things may appear charitable but are not), the CTO should accept the fact that the bequest is charitable (claim charity exemption on the IHT form) and then the Trustees register the charity with the CC. No IHT is paid.

The same result would occur if you leave your estate to "charity at the discretion of my executor". That will be IHT free.

However, setting up a charitable fund by will is a right pain in the neck. I would always advise that the testator try and choose a pre existing charity who is an incorporate body, but with a "cy pres" clause just in case that folds. That will ensure that the money goes to charity in perpetuity.

[dzug]

Many thanks barmaid for a reassuring answer. I feared that the relatives might be 'done' for IHT that was otherwise not due and that the charity would reclaim the lot once set up.

As to actually setting it up, that's a somebody else's problem thank goodness.