Two Wills, Two Tax Outcomes: Understanding Charitable Gifts in Wills
Gifts to charities are usually free of Inheritance Tax. However, the way in which a gift is left to charity can alter the overall amount of tax due. This is due to the way gifts are divided between charities (or other exempt beneficiaries such as a surviving spouse) and other people (non-exempt beneficiaries). This gives rise to the question: should the tax be calculated on the whole estate first and then divided between the charities and individuals, or should the division be made first and then tax paid only by the non-exempt beneficiaries?
This issue was addressed in the two landmark cases: Benham (1995) and Ratcliffe (1999). The distinction is based on how precisely the Will is written and what the deceased’s intention was. Depending on which option is chosen, there can be substantial implications for how much Inheritance Tax (IHT) the estate as a whole pays and how much each beneficiary receives.
Tax calculated first and then the estate is divided (The Benham Approach)
The exempt and non-exempt beneficiaries receive the exact percentage (or share) as stated in the Will. This results in a larger IHT liability overall due to the exempt and non-exempt beneficiaries receive their share after Inheritance Tax has been paid.
Re Benham’s Will Trusts (1995)
In Benham, the Will included wording that the shares to residuary beneficiaries should be “equal after tax”. In effect, each class of beneficiary (exempt and non-exempt) should receive the same net amount after any IHT due on the residuary estate was deducted.
The Court held that the non-exempt beneficiaries’ share must be grossed up to pay not only the net share but also the tax that is attributable to that portion, so that the net result is equal shares for all residuary beneficiaries.
As mentioned above, this results in more Inheritance Tax being paid.
Practical Implications of the Re Benham approach
All residuary beneficiaries receive the same net figure (regardless of their exempt status), meaning the non-exempt beneficiaries bear more of the tax burden.
The executors will have to “gross up” the non-exempt part: i.e., determine what the non-exempt share would have to be so that after IHT it equals the net amount received by the exempt beneficiaries.
Because tax is calculated on a larger gross amount, the effective rate of IHT (percentage of the estate) may be higher.
This calculation can be complicated, especially if there are also other legacies in the Will that are ‘free of Inheritance Tax’.
Residue divided first then tax calculated on non-exempt shares (The Ratcliffe Approach)
The residue is divided as per the Will and the tax is calculated on the non-exempt beneficiaries share only. The exempt portion (charity) receives its gross share without taking on any of the IHT burden.
Re Ratcliffe (deceased) (1999)
In this case, the residuary estate (after debts, funeral and testamentary expenses) was divided half between charities (exempt) and one half to other beneficiaries (non-exempt). The wording did not indicate that the non-exempt beneficiaries share should be “after tax” or equal net (of tax) to the charities.
The court decided that the division should be calculated on a gross basis: i.e. the estate is divided first, then IHT is charged on the non-exempt portion only. This means the exempt portion (charity) receives its gross share without Inheritance Tax being deducted.
This produces a lower IHT liability overall compared to a Benham calculation.
Practical Implications of the Re Ratcliffe approach
The exempt beneficiaries (e.g. charities) receive their share without bearing any of the tax. This means the tax burden falls wholly on the non-exempt beneficiaries.
The estate pays less tax in total than under Benham because you don’t gross up the non-exempt share to an artificially higher amount.
Unless the Will clearly directs a Benham-type arrangement, the Ratcliffe (gross approach) is the default position that will be used.
Comparison and key differences
Feature |
Benham(“net-equal” approach) |
Ratcliffe(“gross-division” approach) |
| Wording intention | Will explicitly or by implication suggests equal net shares after tax between exempt and non-exempt beneficiaries. | Will states shares of residue (e.g. one half each) but does not specify equality after tax; standard drafting. |
| Tax burden | Higher overall IHT; non-exempt beneficiaries pay more so that net shares match. | Lower overall IHT; non-exempt beneficiaries bear the IHT; exempt beneficiaries bear none. |
| Beneficiary outcome | All residuary beneficiaries receive equal net amounts (exempt & non-exempt). | Exempt beneficiaries receive their gross share; non-exempt beneficiaries get their share minus IHT. |
| Implication for Estate Planning | If you want non-exempt beneficiaries to end up with the same net as charities, must draft for Benham; expect higher tax. | If standard distribution is acceptable, Ratcliffe approach is simpler and tax efficient. |
Article prepared by Melissa Howman
This article does not constitute legal advice and we recommend you take professional advice before taking any action
How we can help
Our solicitors specialise in advising on Inheritance Tax and we can help advise on the making gifts to charities in Wills. To book a free initial consultation, please call us on 01260 769 639. We offer appointments at our Congleton office or in your own home. Alternatively, meetings can be carried out online (e.g. via Teams).
Our solicitors will be happy to advise you on your options regarding charitable gifting.
Paul ClarkTEP
Paul is the managing director of Spall Clark Solicitors. He is a solicitor, full member of STEP and a member of the advisory committee of the Law Society Private Client Section. Paul was shortlisted for the Private Client Practitioner of the Year Award at the British Wills and Probate Awards 2025.
He is currently spending more of his time on management matters and will take the lead on complex matters including providing technical support to other team members.
Melissa Howman
Melissa is a Solicitor at Spall Clark Solicitors and has worked in the legal profession for over 11 years. Melissa has specialised predominantly in Private Client over the past 5 years and is a member of the Association of Lifetime Lawyers. She is a Dementia Friend with the Alzheimer’s Society and is due to start the STEP diploma in January 2026.
Natasha Yelland
Natasha is a Solicitor at Spall Clark Solicitors and an affiliate member of STEP. She has been working within the legal profession for over 4 years with a specific focus in Private Client.
Natasha was shortlisted as a Finalist for the Rising Star (Legal) Award at the STEP Private Client Awards 2025 and was also shortlisted for the One to Watch Practitioner of the Year Award at the British Wills and Probate Awards 2025.
