Inheritance tax planning - Gen X left in the dark about inheritance plans

Death and money are no-one’s favourite conversation starters, which makes discussions around inheritance difficult. Many families will simply ignore it. However, there is a price to this reluctance, with more families paying inheritance tax (IHT), and more disputes over wills making their way through the UK courts. Finding a way to talk about succession planning is vitally important

Inheritance tax planning in the UK - the size of the problem

The Charles Stanley Money Milestones research* reveals the extent of this problem. It found that 36% of Generation X (born 1965 to 1980) do not know their parents plans on inheritance, and 23% say their parents have never spoken to them about their plans. The problem is slightly less acute for Millennials, where 27% do not know their parents’ plans. It may be that younger generations are less squeamish about broaching these tricky subjects.

It is also more complicated than simply a communication problem. There is also a planning problem among older generations. When asked how much IHT would be payable on their estate in the event – only 52% said they knew. The remainder have no idea. The problem is particularly acute among women, with 55% saying they don’t know the extent of their IHT liability.

There is also evidence of a real lack of understanding on when IHT might be due and how much. Of those who have an estate under the value of £100,000, 42% think that there will be IHT payable in the event of their death. In reality, inheritance tax kicks in only after the £325,000 nil rate band is exhausted.

Even more worryingly, 21% of Baby Boomers say they don’t have a will. This means that they are ceding control over who inherits their home and other assets to the legal system. Intestacy is governed by strict rules and they should not assume that their assets will necessarily go to their spouse or their children in the way they would want. Making a will is the only way to control precisely where your assets end up.

Against this backdrop, it appears that in some families, parents may not be talking to their children about inheritance not because are avoiding the conversation, but because they haven’t done anything about it.

Great wealth transfer

Either way, families need to find a way to plan for and discuss succession. The great wealth transfer is underway. Baby boomers are the wealthiest generation there has ever been, with more than £2.5 trillion in property wealth. Half of this generation has more than £500,000 in assets. Over the next two decades, this will gradually be passed down to Generation X and Millennials. It has been labelled “the largest flow of generational capital ever seen in the history of humanity”. In the UK, around £5.5 trillion will be transferred from one generation to the next.

The danger is that these assets are transferred in a disorderly way: the heirs don’t know what to expect, IHT liabilities are poorly managed, and the next generation doesn’t understand how to manage the assets they inherit. Just as an aside, it is currently estimated that around half of UK millennials are planning to invest in crypto assets.

The problem is exacerbated by a growing wealth disparity between older and younger generations. The Resolution Foundation Inequality Control found that median wealth among Brits in their 60s was 55% higher in real terms than those of the same age in 2006-08, whereas median wealth for those in their 30s was 34% lower. It also showed the share of 35-44-year-olds owning their own home fell from 73% in 2006-08 to 66% in 2018-20.

That means more and more people are relying on inheritance for their financial stability. As the cost of living rises, people look to inheritance to get on to the property ladder, to retire, or even just to maintain financial stability.

With these higher stakes, IHT disputes are already on the rise. Modern families tend to be more complex – often involving a patchwork of step-families, half-siblings, and second or third marriages. This creates a range of claimants on a single estate, and multiple potential disputes about how the estate is dividend. Age-old grievances may be revived when money is at stake.

Neglecting to talk about estate planning is also expensive. IHT is forecast to affect over 37,000 estates by 2027 – generating nearly £9bn in revenue per year. Planning ahead ensures individuals can employ the broadest range of options to mitigate the inheritance tax bill they leave behind. There is no IHT payable on legacies to spouses, for example, and there is an additional residency nil rate band of £175,000 (or £350,000 per married couple or civil partner) for the family home as long as it is given away to children or grandchildren.

Gifting is a straightforward option to reduce the size of your estate, and the earlier you start, the better. This means you can make maximum use of your annual gifting allowance of £3,000, or make regular gifts out of income, which have no limit as long as you can show they don’t diminish your standard of living. You can also make potentially exempt transfers of any size IHT free, as long as you live for seven years after they are made.

Read more: how to pay less inheritance tax in 2025

The bottom line

Succession planning is vitally important to ensure that money is passed between generations in an orderly way. As part of that, discussing inheritance plans with family members ahead of time can help manage expectations and allows any disputes to be resolved ahead of time. These conversations are unquestionably complex and can be uncomfortable, but they can prevent considerable heartache and expense in the longer-term.

How Charles Stanley can help

At Charles Stanley, we know that finances are rarely just about figures. They’re about families, responsibility, and care.

Having an experienced financial planner who can work closely with you is crucial. Especially in later years as you try to balance the need to live comfortably whilst trying to pass your wealth onto the next generation.

With the right planning, you can look after yourself and your family – making decisions with confidence and clarity – it allows you to face the future knowing that your finances and legacy are well looked after.

To find out how we can help you build a balanced, personalised financial plan – get in touch today. It all starts with a conversation.

Find out about our financial planning services

*The research was conducted by Censuswide, among a sample of 3,001 ‘mass affluent’ consumers, aged 18+ (defined as those earning above the UK average pre-tax salary (£33,000) AND with at least £1,000 in accessible cash/savings). The data was collected between 14.02.2025 - 21.02.2025.