Securing your Legacy: The role of a Financial Adviser in Estate Planning

Previous generations might have had a house and some cash in the bank and very little else to pass on.  A surviving spouse or children would inherit their estate, almost automatically.

But time has moved on. Property, investments and pension plans have allowed many of us to build up wealth. The taxman has started to take an interest in what we leave behind.

A solicitor can help us write a will, but there are tax and legal considerations, that need expert knowledge. We need a financial expert with our financial interests as their only focus.

In other words, we need an independent financial adviser.

What is an independent financial adviser?

An independent financial adviser (IFA) can offer expertise on every aspect of personal finance and the advice they give you must be impartial.

An independent financial adviser offers whole-of-market expertise and they may be qualified to advise on all aspects of personal finance, from property and pensions to savings, investments and tax – a broad range of skills that is going to be essential if you are looking at the most suitable ways to pass on your wealth.

What exactly is the inheritance challenge?

The challenge with inheritance is inheritance tax, or IHT. Once intended as a tax on only the very wealthiest estates, inflating house prices have pushed up people’s net wealth so that many more people have been caught in its net. IHT kicks in when the value of your estate passes £325,000. Go past that figure and the taxman can help himself to 40% of everything above the threshold.

The wealth you spent a lifetime accumulating could be diverted to the taxman, rather than go to those you love. HMRC collected a record £7.1bn in IHT receipts from just April 22 to February 2023 – £1bn higher than the same period a year earlier. 

Estate planning could help

Estate planning, also known as inheritance tax planning can limit the amount of wealth that is lost to the taxman on your death. But the rules around leaving and inheriting an estate are complex, involving every aspect of your financial arrangements. 

Will your pension be included in your estate? Can your spouse keep the home you have shared? What about investments?

Every year, some families lose out because they cannot negotiate the minefield that IHT has become.  You need help from an expert not just in tax law, but in financial planning, insurance, investments – virtually every aspect of your finances.

An Independent Financial Adviser is uniquely qualified to provide the help you need.

How does an IFA tackle estate planning?

An IFA will start with a fact find, looking at every aspect of your current financial arrangements, and really understand what your future financial ambitions and goals look like. When they understand what the liabilities faced by your family will be they can look at ways to mitigate them.

These could include:

  • Writing up your will. Your will is one of the most effective ways to minimise IHT. Without one, your estate would be dealt with according to the Rules of Intestacy, which could mean more of it goes to the taxman. However, exactly how your will is written and even worded can mean the difference between your family or the taxman receiving your cash.
  • Gifting cash. Giving away cash before you die will mean that no IHT is payable. You must live another seven years after giving the money away to avoid ‘deathbed giving’, but you have a £3,000 tax-free gift allowance to use each year.
  • Setting up a trust. You can put cash, property or investments into a trust. But remember that assets placed in trust only fall outside of your estate for IHT purposes if you live for at least seven more years.
  • Insuring against the inevitable. A whole of life insurance policy can provide a simple, although not cost-free solution. Take out a policy in trust, and your executors can use the proceeds to pay off the IHT bill. 

There are many other measures to consider, but all have one thing in common, namely that you must make sure your arrangements are in place before your death. 

Get working for you today

We never know what is around the corner, and when it comes to IHT the sooner you talk to an expert, the better.

Simply call us at Continuum for the advice you need. 

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.

The value of investments can fall as well as rise and you may get back less than you invested.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances. We recommend that you seek professional advice on personal taxation matters.

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