We all want the best for our families. As we move through life, one of the best steps we can take is to ensure our wealth is passed down to them in an efficient, prudent manner, according to our wishes. This is where estate planning can help.
An estate plan lays out a “roadmap” for managing your assets during your lifetime and upon death. It is more than just making a will (although this is a crucial component). Below, we offer some ideas for estate planning, helping your family preserve wealth and avoid common pitfalls.
Your Will – the Bedrock
An estate plan is more than a will. Yet, without a will, your estate plan will be on shaky ground, relying on the UK’s “intestacy rules”, which may not distribute your assets as you desire.
A will legally sets out how your estate should be distributed and who should manage the process (your executors). Many people delay the process, yet this risks leaving a gaping hole in your estate plan, potentially leading to confusion and conflict among surviving family members.
If you have a will, ensure it remains up to date, especially after major life events (e.g., births, deaths, divorces). Review your executors periodically; it is vital that these are trusted people who are happy to carry out the responsibilities involved in your estate.
Don’t forget to make provisions for digital assets (e.g. social media profiles) and personal effects. If you stand to leave behind dependent children or vulnerable beneficiaries, make sure your will also clearly specifies guardianship.
Plan for Inheritance Tax (IHT)
In 2025-26, the UK’s tax landscape is becoming more restrictive for passing down wealth in a tax-efficient way.
Next year (April 2026), the rules for Business Relief and Agricultural Property Relief will become less generous.
The following year (April 2027), unused funds in defined contribution (DC) pensions will fall into the value of your estate, potentially making them subject to IHT upon death.
Fortunately, there are still many strategies available to mitigate needless taxes on your estate. A financial adviser can tailor these to your unique goals, needs and circumstances. However, to give you some ideas, here are some examples to consider:
- Making gifts. Each tax year, you can give away up to £3,000 without this being counted as part of your estate for IHT purposes. This can be done as a single gift or as multiple smaller gifts which add up to £3,000.
- Lifetime gifts. The UK’s famous “7-Year Rule” is still intact, despite tentative speculation that the Chancellor might change it. This allows you to give away an asset (e.g. shares in your company) and not pay IHT on its value, provided you live 7 years after the date of making the gift. If you die within that timeframe, a tapered IHT rate may apply.
- Charitable donations. If you give away at least 10% of your estate to charity, then your IHT rate might fall from 40% to 36%. Depending on the size of your estate and how you structure your bequests, this can benefit the causes you care about and also provide a strategic advantage in mitigating IHT.
Leveraging Trusts
There is a common misconception that putting an asset in a trust immediately exempts it from IHT. Trusts can be great for estate planning, but the reality is more complicated.
Depending on the type of trust, gifts may be treated as potentially exempt transfers (PETs). This makes them subject to the 7-Year Rule – i.e. they will not face IHT if the settlor (the original owner) survives another seven years.
Whilst this may not reflect what you heard (or hoped!), trusts are still powerful estate planning tools that offer control, protection and tax efficiency. For instance, a trust can stipulate when and how beneficiaries receive assets.
The assets can also enjoy greater shielding against probate delays – as well as protection in case of divorce, bankruptcy or imprudent spending.
Trusts come in many different forms, including:
- Discretionary trusts: Offer flexibility for trustees to decide how and when to distribute assets.
- Bare trusts: Simple and tax-efficient for gifts to minors.
- Interest in possession trusts: Provide income to one beneficiary while preserving capital for others.
Choosing the right type of trust depends on your goals, asset types and family dynamics. Speak with a financial adviser to decide upon your best option(s) in light of your goals and situation.
Consider Intergenerational Wealth Planning
Estate planning is about more than just passing on assets after death; it’s about helping the next generation thrive. This is where the concept of intergenerational planning truly shines.
Intergenerational family planning includes several important aspects, such as promoting financial literacy among children and grandchildren and encouraging the responsible management and preservation of family wealth.
It can also involve supporting adult children or grandchildren with housing deposits, education costs or business ventures.
There are multiple options here if you are interested, such as setting up Family Investment Companies (FICs) or Trusts with multiple generations as beneficiaries.
If you’d like to make sure you’re taking the right steps to safeguard your estate plan and family, please get in touch.
The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.
The Financial Conduct Authority does not regulate Wills, Trusts and Inheritance Tax Planning
The content in this article was correct on 1st July 2025
You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on savings, pensions, investments, mortgages, protection equity release and estate planning for teachers and non-teachers.
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