Most people spend decades accumulating financial security; a home, a pension, savings, investments. Very few spend time planning how those assets should eventually pass on. Many assume that who they intend to benefit will do so automatically and this is very often not the case.
Without estate planning, your beneficiaries can end up paying exceedingly high tax charges that can eat up most of the net proceeds of the estate, sometimes entirely unnecessarily.
Without a Will, the intestacy rules decide who should inherit your wealth. They follow a rigid legal hierarchy that does not take into account your personal circumstances, tax efficiency, and the realities of modern family life.
Hannah Wallbridge and Kane Prior, associate financial planner/technical paraplanner at Chester Rose have collaborated to provide guidance and key considerations on planning your estate below.
Protecting Family Wealth: Join Our Estate & Inheritance Tax Planning Seminar – 22 July
Join our specialists at Gardner Leader and Chester Rose Financial Planning for an informative and practical discussion focused on helping families and business owners protect wealth, support future generations and plan with greater confidence here.
What steps can I take to help preserve family wealth over the long term?
These are the areas where financial planning makes the biggest difference:
Pension nominations
Pensions are usually the largest single asset in an estate, yet they are governed not by a Will but by a nomination of beneficiaries lodged with your pension provider. They are frequently out of date, and the consequences of an incorrect nomination can be significant. From April 2027, pension funds will also be brought within the scope of Inheritance Tax, making this area more complex and more important than ever.
Inheritance Tax planning
Inheritance tax is charged at 40% on the value of your estate above the nil-rate band (currently £325,000, with an additional residence nil-rate band of up to £175,000 where a property passes to direct descendants in estates up to £2.2m). The nil-rate band has been frozen since 2009, and rising asset values mean more estates are caught each year. Effective inheritance tax planning through lifetime gifting, trust structures, and pension positioning can significantly reduce the liability.
What common mistakes do families make when planning for the future?
No Will, or an outdated one
Just under half of UK adults have no Will. Of those who do, many have not updated it after a major life event such as marriage, divorce, birth, or bereavement. Marriage revokes a Will and many overlook this assuming their previous Will remains valid. Reviewing your Will every 5-10 years, or sooner when there is a major life event, is so important and can avoid devastating consequences for your family.
Ignoring the pension
From April 2027, pensions will be considered as part of an individuals estate for inheritance tax purposes. If the chosen beneficiary is also a higher or additional rate tax payer, this can result in double taxation of the inheritance tax charge (40%) and then income tax charges (40/45%) upon the net proceeds, resulting in the beneficiary in some cases receiving only 33% of the pension value.
Treating it as a one-off exercise
Estate planning is not something to do once and file away. Legislation changes, family circumstances evolve, and asset values shift. Regular reviews are required to ensure the plan remains suitable and effective.
Failing to prepare an LPA
Lasting Powers of Attorney are important at all stages of life and should be a cornerstone of your estate planning. There is no automatic right of a spouse or next of kin to be able to access your finances, deal with your property or even make medical related decisions for you if you ever become unwell or had an accident, meaning you couldn’t make your own decisions. An LPA allows you whilst you are in good health, to decide who should be in charge of these decisions and enables you to grant them with the legal authority to act when you need them most. Without an LPA your family will be left to apply to the Court of Protection waiting months, sometimes over a year, before any decisions can be made.
How can professional advice help with inheritance tax planning and succession planning?
A financial planner’s role in estate planning is to bring everything together into a coherent, bespoke strategy and to keep that strategy current as circumstances change. A solicitor will ensure that your wishes are translated into legally binding valid documents which will safeguard your wealth and protect your loved ones. Professionals working together mean that clients receive holistic support and advice ensuring all angles are covered, resulting in peace of mind for you and your family.
In practice, this means modelling inheritance tax exposure and the impact of different gifting or trust strategies, coordinating with a solicitor where legal documents need updating, and using cashflow planning to show the long-term picture.
It also means having the conversations many people put off. Who should benefit, and in what proportions? What happens if a beneficiary predeceases you? How do you balance passing wealth on with protecting your own financial security in later life?