The aim of a financial plan is to help you achieve your goals and create financial independence. Most people think of getting on the property ladder or planning their perfect retirement. Planning what should happen to your money when you are gone can be a more difficult subject to tackle.
But there are several reasons why estate planning is a key part of any financial plan. When you have worked hard to build up wealth, it can be extremely fulfilling to know that you will leave a legacy behind. Efficient estate planning can help also save on taxes and help to ensure that more of your money goes to those you intended.
Crafting a great estate plan can take time and should not be rushed. Below are some tips to help you get started.
Make a Will
A will is the foundation of any estate plan, yet many people put it off indefinitely.
The rules of intestacy are different throughout the UK, but will allocate your assets to your spouse, children, or other family members in a specified order of priority. If you don’t have any family, your estate will pass to the Crown.
Before considering why you should write a will, we should first look at what will happen if you don’t have one. Without a will, you cannot:
- Appoint someone you trust to deal with your affairs
- Decide who should inherit your assets and in which proportions
- Make specific gifts to certain people
- Pass any of your estate to people who are not related to you, for example, partners, step-children, foster children, friends, or carers.
- Decide who should not inherit your estate.
- Set up trusts or make charitable gifts.
- Use your will to help structure how your estate passes on death, which may affect the amount of Inheritance Tax payable.
Making a will is straightforward and may not be as expensive as you think. It will allow you to take control over all of the above factors. Even more importantly, a will can be easily changed. It’s better to make a basic will now, knowing that you can change it later, than to keep putting it off.
Plan Ahead
It is never too early to start thinking about your estate plan.
If you have a young family, you should certainly be thinking about making a will, setting up life insurance, and nominating beneficiaries for your pension fund.
Later, when you become more financially established, you may want to make regular gifts to your family. You can normally give away up to £3,000 each tax year using the annual exemption. Regular gifts may also be exempt under the ‘normal expenditure out of income’ rules if the relevant conditions are met, including that they are made from income and leave you with enough income to maintain your usual standard of living.
If you are financially secure, you might even want to make larger lump sum gifts. Larger outright gifts to individuals will generally become fully exempt from IHT if you survive for seven years after making them. If you die within seven years, the gift may be taken into account when calculating the IHT due.
Business owners may be eligible for valuable Inheritance Tax (IHT) Business Relief on qualifying business assets. However, the rules changed on 6 April 2026. While qualifying assets can still receive relief, the amount eligible for 100% relief is now limited; any value above the available allowance generally qualifies for 50% relief instead. To qualify, you will usually need to have owned the business or qualifying assets for at least two years.
You do not need to own your own business to benefit from Business Relief. Investments in qualifying unlisted company shares may be eligible, although shares traded on the Alternative Investment Market (AIM) now generally qualify for 50% Business Relief rather than 100%. As these investments can be more volatile than mainstream investments, they should only form part of a well-diversified estate planning strategy.
The tax treatment of pensions is also changing. From 6 April 2027, most unused pension funds and pension death benefits will be included within a deceased person’s estate for IHT purposes. Some benefits will remain outside the new rules, including registered pension scheme death-in-service benefits and certain dependant scheme pensions. As a result, the long-standing strategy of preserving pension wealth to pass on tax-efficiently may no longer be appropriate for everyone, making regular estate planning reviews increasingly important.
Make Use of Trusts
Trusts are a complex area with many variations. Broadly, a trust allows you to designate assets to particular people or a ‘class’ of beneficiaries, for example, your children and grandchildren. A trust may be ‘absolute,’ whereby beneficiaries have full entitlement to the assets, or ‘discretionary,’ where the trustees have the final say regarding distribution of income or capital. Generally, the more flexibility a trust offers, the greater the potential tax implications.
Depending on the type of trust, you may be able to:
- Save on IHT. Discounted gift trusts may provide an immediate reduction in the value of your estate for Inheritance Tax purposes, depending on individual circumstances. Transfers into trust can have immediate and ongoing IHT consequences, depending on the type of trust and the amount transferred. Some transfers may also be taken into account if the settlor dies within seven years. Loan trusts, where you retain access to your original capital, can help remove future investment growth from your estate, while the original loan normally remains part of your estate.
- Re-direct life insurance benefits so that they are paid out more quickly and do not form part of your estate.
- Place wealth outside your estate without passing it absolutely to any one individual.
- Protect assets from divorce, bankruptcy or financial mismanagement.
Trusts may have costs and tax implications that outweigh the savings, so it is important to seek advice.
Give to Charity
Charitable gifts are immediately outside your estate for IHT purposes. Regularly making gifts to charity can reduce your estate while doing some good. You may also be able to save on income tax and capital gains tax by gifting cash or assets to charity.
Additionally, if you leave at least 10% of the relevant part of your net estate to charity, the IHT rate applying to that part of the estate may be reduced from 40% to 36%. In some circumstances, the reduced IHT rate can partly offset the cost of the charitable legacy to the other beneficiaries.
Don’t Neglect Your Own Needs
While there are multiple options to create an estate plan and save on IHT, it would be a mistake to do too much too soon. If you give away assets, or place them out of your reach, you might face financial hardship later on if you need to pay for care. Even worse, if you are found to have deliberately deprived yourself of assets to avoid paying care fees, you may not qualify for means-tested support.
Like any part of a financial plan, an estate plan is not a one-and-done type of arrangement. It is most effective when you carefully consider your goals, review it regularly, and make changes in line with your evolving circumstances and wishes.
Please don’t hesitate to contact a member of the team to find out more about estate planning.
The content in this article was correct on 04/09/2026.
The value of your investment can go down as well as up and you may get back less than the amount invested
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age).
The Financial Conduct Authority does not regulate Trusts, Wills, Tax and Estate Planning
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