Six estate planning tips

1. Give some of your wealth away now to avoid IHT

Most people are aware of the seven-year rule: that if you pass on a gift of wealth and live for another seven years it falls outside your estate when calculating IHT. If you plan making any significant gifts, make sure these are known to your solicitor and/or executors so they can make an assessment of whether tax needs to be paid. And how much is due. 

If you have made many significant gifts, consider taking out insurance that will cover the potential tax charge when you die. IHT gets charged on a sliding scale. If you die within the first three years, the estate has to pay 100% of the IHT due. If you live for seven years, no tax needs to be paid. But in between, a sliding scale applies. 

There is a special type of insurance that pays out a reducing value with time. Payouts that can be set to match the potential IHT liability. As the insured value reduces over time, the premiums for the policy also fall to reflect the likelihood of a payout having to be made. If placed in trust the insurance payout can be tax exempt, but the premium is deemed a gift to the estate and will have to be captured in the calculations.  

That being said, 40% of the value of the premium payment is likely to be a lot lower than 40% of the value of the gift. 

Can you make gifts that are immediately free of IHT?

There are some gifts (known as exemptions) that are immediately outside your estate from the moment they are given. 

Transfers between spouses and civil partners are tax free. And there is a range of relatively modest gifts that are immediately treated as outside of your estate. Everyone can gift £3,000 per tax year and there are other exemptions such as gifts for weddings and you can make any number of gifts below £250, providing they are to different people, and they haven’t benefitted from any other gifts from you in the same tax year. 

But the most important exemption is the “gifts out of surplus income rule”. This means, if you have enough income to fund your day-to-day expenses with enough to spare, you can gift this away without creating an IHT liability. This can be a really useful piece of estate planning because you can use it to: 

• Support school fees for your grandchildren 
• Contribute to JISAs for their future wellbeing 
• Contribute to ISAs if they are over the age of 18 
• Contribute to a SIPP; but they need to bear their personal allowances in mind 

But you need to keep good records to ensure your executors can demonstrate the money has genuinely come from your income and you have not had to touch your capital. 

2. Use specialist investment strategies that have IHT reliefs

A second IHT regime refers to assets that are potentially relieved of IHT. This means they attract a reduced level of IHT or zero IHT. 

Investing in smaller companies – the growth engine of the economy – is an example of this. They make use of something called business relief. You must hold the investments for at least two years before your death for this to work. And unlike other forms of estate planning, you still have access to your wealth if you need to draw on it.  

Qualifying investments attract a reduced rate of 50% of the standard rate of IHT. In the current tax year, that means an effective rate of 20%. However, their share prices can vary significantly, and they can sometimes by difficult to sell at short notice. This makes them high risk investments, and they should only be used as part of a wider investment strategy. 

Trusts can be helpful in estate planning, but they can be expensive and complex to set up and once established can be hard to change. There are also many types of trust to choose from, and this is where professional help is essential if you are to avoid costly and unnecessary mistakes. You should also think about the flexibility of the trust wording to make sure you don’t lock in any clauses that could lock out future legatees. 

3. Make sure your pension provider knows your wishes

A little-known fact: your pensions are not covered by your will. To make sure your pension savings pass to your preferred legatees, you need to complete something called a nominations form. This tells the pension provider who you want the money to go to and in what proportions. You probably filled one in when you took out each scheme but it’s a good idea to keep them updated as your life changes. 

Divorce, second marriages, and the birth of children and grandchildren, are all reasons to review your nominations to make sure the right amounts of money go to the right people. If you do not make your wishes known, the scheme’s trustees will have to make a decision on your behalf. 

IHT and pensions 

Another little-known piece of legislation is that historically (and currently), your pension savings are outside your estate when calculating IHT liabilities. If you die before the age of 75, any unused pension savings can be passed on tax free. If you die after the age of 75, the recipients can take the remining value as taxable income.

Chancellor Reeves currently plans to remove this piece of estate planning and draw pension savings into the IHT net from April 2027. The average pension savings in the UK for those over 60 who have put something aside for their retirement are currently £74,000, with men having almost twice as much in savings as women (£79,000 vs £40,000). 

Read more: What is the average pension pot by age in the UK? 

Bringing pensions into your estate can have a major impact on the recipients. Moreso if you die over the age of 75 where there is the potential threat of double taxation: 40% at the point of death and up to 45% when the income is drawn. It would reduce £100,000 of currently tax-free assets to £33,000. A sobering thought, although the precise mechanics of how it will work are yet to be finalised. 

Follow us live on Budget Day 2026 on X (Twitter), Facebook, and LinkedIn for all our as-it-happens commentary and what this potentially means for financial and estate planning.  

4. Leave something to charity

If you leave at least 10% of the taxable part of your estate to registered charities, it reduces the effective IHT rate to 36% from 40%. If you’re looking for estate planning ideas that also help to make a positive impact on the world, consider donating to one or more of your favourite charities. 

5. Make sure your wishes are protected 

An absolutely critical piece of inheritance planning is a will. It helps your executors carry out your wishes and stops any arguments within the family and other legatees once you are no longer around. 

Dying without a will (“intestate”) leaves it to the courts to decide how your wealth is to be divided. This might not be in the way you expect, and it might not be in a way you would choose. 

This is particularly important if you are divorced and have remarried. A new marriage or civil partnership renders all previous wills void. Any provisions you might have made for the children from your first marriage will no longer be applied and their inheritance will not be protected. And if you are in a domestic partnership that is not legally recognised, your partner could get nothing at all. This is an area where taking estate planning advice can make a significant difference to the future financial wellbeing and peace of mind not just of your legatees, but for yourself, too. 

You should also consider a lasting power of attorney (LPA) to provide the comfort that someone you trust is looking after your interests if you were to be incapacitated in any way. 

If you own a business, you can also put a business power of attorney in place, nominating a professional, peer, or colleague, to manage the company in your absence. This takes the strain off the family at a time when they may not have the skills or emotional strength to pick up the reins on your behalf. 

6. Seek financial and estate planning advice

Estate planning in the UK can be very confusing. IHT rules, exceptions, and exemptions are a labyrinth to navigate no matter how much wealth you have. Some strategies are more complex than others and all of them have to be considered in relation to your current and future financial needs. 

Speaking to a financial professional about your property and financial affairs can help clear things in your mind. They can help you structure your wealth in ways that minimise your estate’s IHT liability and maximise your legacy while providing benefits to your loved ones while you are still alive.  

But legacy planning can also be an emotive topic. The most important thing to do is speak to the family about your plans and intentions and to discuss the best way forward for the family unit. Passing wealth to the next generation can have IHT benefits but you need to balance the scales and make sure no-one is upset by your actions. Gifting some of your wealth to some of the family now could be seen as favouritism; everyone needs to understand the bigger picture. 

How can Charles Stanley help you create an estate plan?

Bereavement is a difficult time for those we leave behind. Having a robust estate plan in place can help smooth the way. Your solicitor or executors will have a set of clear instructions that can be actioned on your behalf, and you will have the peace of mind knowing you have done all you can to help your executors and heirs when you are no longer here to answer their questions. 

Charles Stanley is one of the UK’s leading private wealth management businesses with a range of financial wealth management and estate planning services. It's never too early to start planning. While many put off thinking about their legacy until they near retirement, anyone who has any level of wealth needs to think about how they want the affairs settled – including first time buyers! 

As your life changes, your plans might need to adapt, and new strategies might need to be put in place. The important thing is to understand the options available to you. A good financial adviser and/or solicitor will help you understand your potential tax liability and fully explore your different options.  

At Charles Stanley we offer a range of financial planning services tailored to the needs of our clients. From one-off simple questions to complex multi-dimensional considerations, we are here to help you make sense of it all 

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