Give your money to your loved ones – not the tax man

Estate Planning is often misunderstood as something that only very wealthy people need to do in order to avoid paying Inheritance Tax (often abbreviated to IHT) on their estate. This isn’t the case and, with property prices as high as they have ever been, many average households are likely to pay unnecessary amounts of Inheritance Tax if they do not take the right measures through sensible Estate Planning.

More and more people are at risk of seeing the amount they can pass on to loved ones seriously diminished by tax. So, if you’ve owned your main residence for a number of years and have some savings and investments, now could be the time to talk to a Chartered Financial Planner to ensure your wealth is protected and destined for your loved ones, not the tax man.

What is Estate Planning?

Estate Planning is a broad term that describes the process of arranging your wealth, personal belongings, property and financial assets so they can be transferred to a designated person, group of people, or perhaps a charity without paying unnecessary sums of Inheritance Tax. For example, this may include keeping your will up to date, arranging a trust for loved ones, or gifting some of your assets or wealth. This is normally an inter-generational transfer, such as a parent’s estate passing to children or grandchildren. Put simply, Estate Planning ensures you can transfer the right assets, to the right place, at the right time.
Estate Planning is a legal procedure that allows you the freedom to arrange your finances and assets in the most tax-efficient way as long as you or your financial adviser observe the limits that the UK government places on various kinds of tax relief. Some of these are lifetime allowances and others are annual. When it comes to Estate Planning, it is best to seek highly qualified and experienced Chartered Financial Planner as effective planning will often require a number of arrangements to be made together.

How much can Inheritance Tax reduce the value of an estate?

Normally, Inheritance Tax is payable on the total value of your estate when you die. This includes your belongings, property, pensions, investments and savings, and life assurance. In the UK, most people will not have to pay Inheritance Tax on the first £325,000 of the value of their estate (or £650,000 for couples). Anything above this is usually taxed at 40% and any tax must be paid before the estate can be transferred.

For example, a single person with an estate valued at £1,000,000 would receive a tax charge of £270,000. This is because there is no tax to pay on the first £325,000 and Inheritance Tax of 40% charged on the £675,000 above this allowance, which is called the ‘nil rate band’. Estate Planning could reduce the amount of the tax charge significantly – in fact, Inheritance Tax is one of the few taxes that can be significantly reduced or avoided altogether with careful, professional planning.

What are the key considerations for Estate Planning?

Effective Estate Planning may require only a few small changes to how your wealth is organised or it may be more complicated, requiring a number of arrangements and financial policies to minimise the Inheritance Tax liability on your estate. Here are a few arrangements that are commonly used in the Estate Planning advice process:


Writing a Will is often one of the first methods used in Estate Planning. As a legal document, it provides you with a clear framework as to how your possessions, money and property will be distributed when you die. This gives you better confidence and certainty that those close to you will be looked after and also allows a financial adviser to accurately assess your Inheritance Tax liability.

Without making a Will, your spouse or civil partner will not necessarily inherit your entire estate. Instead, your estate may be distributed according to ‘rules of intestacy’, which may mean your possessions, money and property are divided amongst a much wider group of people, creating financial hardship and unsettling family relations. A valid Will is a simple means to avoid these risks.

Lasting Power of Attorney:

A Lasting Power of Attorney is an arrangement that allows other people, such as your loved ones, to make decisions on your behalf if you are no longer able to. There are two kinds of these legal arrangements, both of which define what can be done on your behalf and in what circumstances. The first type is a ‘Property and Financial Affairs’ Lasting Power of Attorney, which allows loved ones to manage your finances; and the second type is called a ‘Health and Welfare’ Lasting Power of Attorney, which allows them to take decisions about healthcare and wellbeing.

It is important to note that a spouse or loved one has no automatic right to make decisions on your behalf and no say so over property that is solely yours. For this reason, a Lasting Power of Attorney can provide a valuable Estate Planning role, giving you and those around you security and confidence in the event you are unable to run your own affairs.

Nomination of Beneficiaries:

Many financial policies and arrangements can be passed on in the event of your death. Although some arrangements will be taxed and others may not, it is important to ensure that you nominate beneficiaries – those who you would like to inherit the proceeds of any policy – if you die. Such financial arrangements include your pensions, life insurance policies and any trusts. It is important that you keep these up to date, particularly if you have not made a Will.

This is a simple Estate Planning matter that can ensure trustees and financial providers have clarity as to who should receive any proceeds, making the administration much quicker at what can be a difficult time.


Trusts are legal arrangements that transfer ownership of your property from you, and your estate, to somebody else. This can be an effective Estate Planning technique as trusts reduce the value of your estate, meaning you can reduce any Inheritance Tax liability. There are many different types of trust that can be used according to the circumstances. One significant benefit of trusts is that they offer the ability for you specify individuals, or groups, who will benefit from the trust, and specify the circumstances in which they will benefit.

Arranging trusts can be complicated and it is important that all relevant rules and laws are followed to avoid attracting tax. In these cases, it is highly recommended that you seek the advice and expertise of a Chartered Financial Planner to establish trusts in the correct way and continue to manage and monitor them.


Gifting simply means making small gifts to loved ones, or even loved causes, in order to reduce the value of your estate. In doing so, this can reduce the amount of Inheritance Tax it attracts. The government provides every individual with an annual gift allowance, known as an ‘Annual Exemption’, so you may find this both simple and appealing.

Insurance policies:

Larger gifts can also be made but may attract Inheritance Tax if you were to die within 7 years of having made a gift to somebody. If you are considering a large gift, it can be possible to use a life assurance policy to cover the potential tax liability if you did not survive for 7 years after making the gift. This can be a complex area of Estate Planning, so it’s important to seek help from a qualified financial adviser.

Let Creative help you secure your legacy with confidence

Creative’s Wealth Management Team of Chartered Financial Planners and Financial Advisers are experts in Estate Planning. We can help you secure your legacy, which you have spent a lifetime growing and preserving, so it isn’t taxed away, leaving people you care about in financial hardship. We cover all aspects of Estate Planning and can work seamlessly with your solicitors and accountants to arrange and manage financial plans on your behalf. Make the future certain for those you love – talk to Creative today.


Important information about Estate Planning Advice

  • Trust plans are not regulated by the Financial Conduct Authority
  • Thresholds apply to the Residential Nil Rate Band allowance
  • If you stop paying into a protection policy, you will no longer be covered

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