Finding the best way to pass your wealth on to your loved ones

Protecting your estate and passing on wealth to loved ones is normally a big part of investment planning

Two things are particularly important when planning to leave an inheritance: ensuring that the right people inherit your wealth and reducing Inheritance Tax.

Estate Planning is the process of managing assets in the event of incapacity or death. Your possessions, property and money are all part of your estate. It could also include your pension. We can guide you through any potential liabilities that you or your family could be faced with and help reduce your Inheritance Tax accordingly. Careful planning will help minimise taxes, court costs and legal fees. Our advisers will work with you to review your estate planning regularly as your circumstances and the tax rules change.

Inheritance Tax Planning often forms a large part of estate planning and is a complex area, as the decisions made can have long-term effects. Rising house prices mean Inheritance Tax is becoming an issue for more and more people. Our advisers can help you to minimise the amount of tax payable and improve the amount your loved ones receive.

We can offer financial advice on preserving your family’s wealth through financial gifting, trusts and other tax efficient ways to provide for your children and grandchildren’s futures.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.


Inheritance Tax is the tax that your beneficiaries may have to pay on your estate

Every individual has a Nil Rate Band, in the 2021/22 tax year this is £325,000. If you are married or in a civil partnership, any unused allowance can pass to their surviving spouse resulting in an allowance of up to £650,000. Anything over the Nil Rate Band will potentially be taxed at 40%.

When advising you on Inheritance Tax planning, we will consider the following:

• Making a Tax-efficient Will

• Gifting during your lifetime

• Transferring assets into a pension

• The use of Trusts

Life insurance


Leaving money to children or grandchildren

Gifting money, property or possessions to family is another way you can reduce your Inheritance Tax liability. 

The earlier you start Inheritance Tax Planning, the more money you will be able to gift to your loved ones without incurring Inheritance Tax.

Each person has an annual gift exemption of £3,000 per year that you can use to gift money or assets exempt from IHT. If you do not use your exemption, you can carry it forward for one year. For example, a couple can gift up to £12,000 in two years using this exemption.

You can also make unlimited gifts of £250 to anyone else who you have not utilised another exemption for.

Read our guide to using gifting to reduce Inheritance Tax

Using a pension to transfer wealth to loved ones

Passing on assets through your pension pot is a tax-efficient estate planning solution. You can nominate any individual to inherit the remainder of your pension fund. Funds within a pension are not subject to Inheritance Tax and as they are outside of your estate. If the funds remain in drawdown, they will continue to be exempt from Inheritance Tax meaning the funds can be passed through your family generations. Any pension growth is very tax-efficient.

If you die before the age of 75, assets can be paid to your beneficiary completely free from tax. If you die over the age of 75, the assets will be taxed at the beneficiaries’ income tax rate.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances. 

Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place and along with Trusts are not regulated by the Financial Conduct Authority.

Estate planning is reviewing your finances and assets and making a plan in advance naming who you wish to inherit your assets.

When creating an estate plan, you will need a full list of your assets and their worth and your life insurance policies. You will need to decide how you would like your estate to be distributed and the individuals you want to include in the estate plan.

You can give your child up to £3,000 worth of gifts each tax year as an annual gift exemption without it being added to the value of your estate. In addition there are also other annual exemptions that may be available dependent on circumstances. 

You do not pay tax on a cash gift, however once received and then invested the capital could produce future income which may be taxable. In addition, should the person who made the gift die within 7-years of the gift, the recipient of could have a potential Inheritance Tax liability.

Over £5.1 billion in Inheritance Tax was paid in 2019/20*

                                        *Statistica, Inheritance tax receipts, 2020