5 top tips for inheritance tax planning

With inheritance tax receipts to HMRC set to reach new levels this financial year, now more than ever are families planning for their future accordingly. 

Our aim is to help you navigate through the ins and outs of inheritance tax planning without the jargon, so you can ensure your loved ones receive more of what you leave behind. 

At Continuum we are looking at the five practical strategies to make the most of your hard-earned assets. 

1. Get talking

The first step towards a successful inheritance plan for all families is communication. Talk to your spouse, children, and stepchildren. Understand their concerns, expectations, and spot the potential conflicts.

Some items may have emotional as well as purely monetary significance to some family members. That ring that has been passed down on one side of the family for years, the old picture that was part of a first home.

You need to find out what items are significant to each family member, and you may need to find some compromises. They can’t all have your watch or your diamond ring.

If you have children who no longer have much contact with you, you may still need to discuss your plans with them, even if it takes a special effort.

One solution may be to allot each beneficiary the most appropriate sentimental item and divide up wealth equally.

2. Take stock

The next step in your inheritance planning journey is creating an inventory of your financial assets. Your home and any other property, investments, savings, and any valuable possessions. If you have a surviving partner, they might be your first priority, but you need to look at what happens when they are gone.

Your home may be the biggest challenge. It can be difficult to balance its value against other assets and giving it to one beneficiary may lead to resentment. Stipulating that it should be sold and the proceeds shared is one answer. A shared bequest that allows one beneficiary to buy out the shares of the others is an alternative.

You also need to look at the liabilities or debts that eat into your estate. You want to leave financial security and happy memories, not debts.

Knowing what you have now can be the basis for devising a fair inheritance plan that takes into consideration the needs of everyone who survives you.

Look at your life insurance as part of this review. It can help ensure equal inheritance for all parties. The payout from a life insurance policy can be divided among the beneficiaries, helping to balance any disparities in the value of your other assets.

3. Watch out for the taxman

Inheritance tax could take a large proportion of your wealth – 40% or everything above £325,000 -and stop your family members enjoying the results of your hard work. Avoiding or reducing inheritance tax is possible, if you have expert advice, and plan accordingly.

4. Write that Will

A well-crafted will is the linchpin of any inheritance plan, and for all families, it is crucial. Work with an experienced solicitor to draft a will that clearly outlines your wishes and specify the exact percentage or value that each heir, whether biological or stepchild, will inherit. This ensures that your intentions are legally binding and minimises potential disputes later on.

Review and update beneficiary designations on retirement plans, investment accounts, and insurance policies. Beneficiary designations override instructions in your will. Failing to update can lead to unintended consequences –  money intended to go to a current partner still being earmarked for a previous spouse is not uncommon.

5. Get professional help

Seeking the guidance of a qualified financial adviser is vital for any family.

At Continuum we can provide tailored advice based on your unique situation and help you make informed decisions that prioritise fairness for all concerned. 

We can also help you regularly review and update your inheritance plan to reflect any changes in your family structure, financial situation, or personal preferences. This proactive approach can help you avoid conflicts down the line and ensure that your estate distribution remains fair and up to date.

Perhaps most important of all, we can help you reduce the impact of inheritance tax – and ensure that all those you leave behind receive all the bequests you want them to have.

Call us today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable inheritance tax strategy, you should seek independent financial advice before embarking on any course of action.

The Financial Conduct Authority does not regulate estate planning, wills, tax and trust advice.


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