Inheritance plans are often created at a particular point in time, but just as life doesn’t stand still, neither does wealth or your family’s priorities. An inheritance plan created several years ago may no longer reflect your current circumstances, aims or aspirations. We explore some areas to check so you can ensure your plan is still fit for purpose and aligned to your wishes.

How to plan your inheritance

An inheritance plan needs to cover both legal and tax implications. By planning who inherits from your estate in advance, you can control what happens to your wealth, so it goes to the right people. But it’s also crucial if you want to minimise future inheritance tax liabilities and any potential family conflict.

Families change over time with people marrying, divorcing, and bringing new life into the world. Whether you have a newborn baby or a grandchild, everyone needs to be included. From a financial perspective, your personal circumstances might have also changed. You might have changed career, sold your business, or you might be working part-time.

The first stage of estate planning is to make an inventory of everything you own:

• Property and land: including overseas and holiday homes.
• Money: including bank accounts, savings accounts, ISAs, investments and shares.
• Pensions and life insurance policies: check your beneficiaries are up to date.
• Business interests: including partnership or shareholder assets and rental properties.
• Possessions: such as cars, boats, campervans, caravans, as well as high-value artwork, antiques, jewellery, watches or designer clothing.
• Digital assets: including digital images, music, files, online accounts and cryptocurrency accounts.

Some pensions and life policies might fall outside of your estate, so check with your financial planner. You will also need to log large debts such as loans, mortgages, and credit cards. These will all need paying off from your estate by your executors after you die.

 Key components of an inheritance plan

Below are some essential components of an inheritance plan to consider:

• Estate valuation: Get an up-to-date valuation of your estate, so you have a clear idea of any potential inheritance tax liabilities.
• Make or update your will: Making your wishes clear in a will helps to ensure a smoother probate process. As your named executors are legally responsible for administering your estate after you die, always choose reliable people. Update your will if you move house, and whenever there’s a big life event such as marriage, divorce, a new child, or a family loss.
• Arrange Lasting Powers of Attorney: This is as important and if not more than having a will. If you lost the mental capacity to make decisions about your estate due to an accident, serious illness or stroke, etc. a nominated attorney can step in. Choose trusted people to become your attorneys such as family members or friends. They can then make decisions on your behalf about property, finances, health and welfare – for example, the choice of care home.
• Consider trusts: Depending on your circumstances, there are different types of trusts that can provide structured control over your wealth and assets. You might want to safeguard a sum of money intended for a child or a vulnerable person. You might also want to protect a pot of wealth from a beneficiary divorce or bankruptcy.

What are the inheritance tax thresholds?

In the UK, the current inheritance tax thresholds (2026) are as follows:

1. No inheritance tax is due when an estate is left to a surviving spouse.
2. 40% inheritance tax is due on estates with a value over the nil band rate of £325,000..
3. Inheritance tax reduces to 36% if you leave 10% of your estate (after deductions) to a charity or eligible community organisation.
4. The nil band rate threshold increases by £175,000 to £500,000 if you pass your home on to a child (including stepchildren and adopted children) or grandchildren. This must be your main residence, and it doesn’t apply if the property is in a discretionary will trust.
5. The above nil band rates are per spouse or civil partner, and unused allowances can be transferred, potentially increasing to £1,000,000 for some married couples.
6. £3,000 annual exemption from inheritance tax for gifting purposes. Gifts given above this amount will be liable for tax if you die within seven years of making the gift.
7. From April 2027, most defined contribution pensions and death benefits will no longer be exempt from inheritance tax. So, your family might need to pay inheritance tax on any unused pension funds after you die, as this sum will be added to your overall estate value.

For more information, please see our blog How to choose the right inheritance financial advisor and visit our Inheritance Planning page.

Financial Planning, Nottingham

By aligning your long-term goals with your estate planning, you can protect how your wealth will be passed on to the next generation. By using a professional financial planner for your inheritance planning, you will understand all your options and make better decisions.
At Balance: Wealth Planning, our aim is to help you protect your family’s inheritance from paying an unnecessary amount of inheritance tax. We will advise you on any tax implications for your estate both now and in the future.

Need to update your inheritance plan? Get in touch with our financial planners.

Sources:

https://www.gov.uk/guidance/trusts-and-inheritance-tax

https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/

https://moneyweek.com/personal-finance/tax/inheritance-tax/605548/reduce-inheritance-tax-bill