Estate Planning

Introduction to estate planning

Estate planning is the process of organising your affairs so that your assets and loved ones are taken care of according to your wishes after you pass away or lose the capacity to make decisions. While it may feel daunting, taking steps to plan ahead can provide peace of mind for you and your family. By creating and maintaining a clear estate plan, you can help reduce the burden on your loved ones, ensure your wealth is preserved efficiently, and mitigate the impact of various taxes and legal procedures.

Estate planning in the UK involves multiple considerations, including drafting a valid will, selecting trustworthy executors, setting up powers of attorney, and taking full advantage of available tax reliefs or exemptions. It also involves thinking about trusts, lifetime gifts, and any steps needed to protect vulnerable family members. The earlier you start, the more time you have to make changes if your circumstances evolve.

Defining estate planning and its importance

• Estate: Refers to everything you own, such as property, cash, investments, valuable items, and business interests.

• Planning: Involves making decisions to ensure that your wishes are respected should you become incapacitated or pass away.

When done effectively, estate planning can:

• Ensure your assets pass smoothly to beneficiaries.

• Minimise or manage Inheritance Tax (IHT) obligations.

• Provide clear instructions around healthcare and property should you lose capacity.

• Offer reassurance to loved ones during a difficult time.

Key components to consider

1. Wills: The cornerstone of any estate plan, enabling you to specify how you want your assets distributed.

2. Executors: Individuals or professional bodies responsible for carrying out the instructions in your will.

3. Trusts: Can help protect and manage assets for specific beneficiaries, and in some cases, reduce tax liabilities.

4. Powers of Attorney: Enables trusted individuals to make decisions on your behalf if you lose capacity.

5. Tax Planning: Critical to ensure you minimise unnecessary taxation and maximise reliefs.

6. Probate: The legal process of confirming a will’s validity and distributing an estate.

7. Gifts and Reliefs: Understanding annual exemptions and lifetime gifting rules can ease potential IHT.

8. Protection for the Vulnerable: Safeguarding those who depend on you through measures like trusts or guardianships.

Practical steps to begin

• List your assets: Include all bank accounts, property, insurance policies, pension schemes, business interests, and personal valuables.

• Identify your goals: Do you want to reduce Inheritance Tax, or are you concerned about specific family needs?

• Seek professional advice: Estate planning can be complex due to constant legislative changes, so expert guidance can help you create a robust plan.

• Review and update: Changes like marriage, divorce, or property purchases can alter your estate’s composition.

A good estate plan in the UK market must be legally valid, tax-efficient, and reflective of your personal values. By comprehensively considering each element of your estate, you ensure that your legacy will be managed effectively and distributed according to your final wishes, easing potential disputes among beneficiaries.

Understanding wills

A will is a legal document that sets out how you wish your property and possessions to be distributed after your death. According to GOV.UK, around 54% of UK adults have not made a will (GOV.UK, 2018), illustrating how many people risk passing away intestate (without a will). When you die without a will, the law decides who inherits your estate based on rules of intestacy, which may not align with your personal wishes.

Establishing a will is paramount to ensure your estate is transferred smoothly to your chosen beneficiaries. It also allows you to appoint guardians for minor children, specify funeral preferences, and outline any particular gifts you would like to leave to friends, charities, or loved ones.

What makes a will valid?

The Wills Act 1837 outlines key requirements for a will to be valid in England and Wales. These include:

1. Age: You must be 18 or over (in Scotland, 16 or over).

2. Mental capacity: You must understand the nature and effect of making a will.

3. Written and signed: The will must be in writing, signed by you, and witnessed by two adults who are not beneficiaries.

Even minor oversights in these requirements can render a will invalid. Seeking professional assistance helps avoid errors that could cause unnecessary delays or legal disputes during probate.

Common elements in a will

• Appointment of executors: The individuals or organisations responsible for managing your estate and carrying out your wishes.

• Beneficiaries: The people or entities who will inherit your assets.

• Residuary estate: The balance of your estate after debts, taxes, and specific legacies are paid.

• Funeral arrangements: Although not legally binding, you can state your wishes regarding funeral or burial preferences.

The risk of dying intestate

Under intestacy rules, only close relatives can inherit, and this can lead to outcomes you might never have intended. For instance, an unmarried partner or stepchildren might be excluded entirely. Additionally, if you have no living relatives, the estate could pass to the Crown. Drawing up a valid will avoids these complications and ensures your estate reflects your personal preferences.

Points to remember

• Review regularly: Major life events such as marriage, divorce, or the birth of a child can affect how you want your assets distributed.

• Store securely: Keep the original will safe—often in a solicitor’s office or a dedicated storage facility—and let executors know where it is.

• Communicate: Discuss the contents of your will with executors and major beneficiaries to prevent misunderstandings.

A valid will should act as the foundation of your estate plan. By understanding the legal framework and taking the time to structure your wishes accurately, you help guarantee that loved ones receive the inheritance you intended with minimal difficulty and confusion.

Choosing executors

Choosing the right executors is a critical step in ensuring that your estate is handled efficiently and your beneficiaries’ interests are respected. Executors shoulder the legal responsibility of administering your estate according to your will and the law. Many people opt for a mix of personal connections (like close family members) and professional advisors (like solicitors or accountants) to handle what can be a complex task.

Why executors are important

Executors have a range of duties, including:

• Locating and valuing your assets.

• Paying debts and taxes.

• Applying for probate when necessary.

• Distributing your estate to beneficiaries according to your will.

Because of these tasks, appointing someone who is not only reliable but also organised, financially literate, and willing to carry out potentially time-consuming responsibilities is crucial. In the UK, people commonly pick family members they trust or a professional such as a solicitor. You can appoint multiple executors to share responsibilities, but they must all agree on how tasks are carried out.

Qualities to look for in an executor

1. Trustworthiness: Executors may handle significant sums of money and sensitive documents, so integrity is essential.

2. Organisational skills: Estate administration involves collecting information from banks, insurers, and other institutions.

3. Availability: The process can be lengthy and require frequent communication with solicitors, HMRC, and beneficiaries.

4. Conflict resolution skills: Executors may need to mediate among beneficiaries with different expectations.

Appointing professionals

If your estate is large, includes overseas assets, or involves complex financial structures such as multiple trusts, you might want to appoint a professional executor. Professional executors are often solicitors or accountants with experience in probate and inheritance tax matters. While they will charge a fee for their services, their expertise can help reduce stress and avoid mistakes.

How many executors can you choose?

You can name up to four executors, but not all need to act simultaneously. Some may choose to step down if they cannot fulfill the role. Having more than one executor helps ensure someone is always available to make important decisions. However, coordination among multiple parties can complicate the process, so balance is key.

Practical considerations

• Age and location: Executors should be adults and preferably reside in the UK to handle tasks that require their physical presence.

• Backup executors: Appointing replacements or “substitute” executors can provide a fallback if your primary choices are unwilling or unable to serve.

• Communication: Before naming someone, discuss it with them to confirm they understand the responsibilities.

In conclusion, executors play a pivotal role in the successful execution of your will. By choosing individuals or professionals who possess the right blend of reliability, financial acumen, and diplomacy, you can ensure that your estate is handled proficiently, providing clarity and security for your beneficiaries.

Powers of attorney

Powers of attorney are legal instruments that let you grant authority to someone else (your attorney) to make decisions about your finances, healthcare, or welfare if you lose mental capacity or want assistance. In the UK, the most commonly used legal mechanisms are Lasting Powers of Attorney (LPAs) in England and Wales, and Continuing Powers of Attorneyand Welfare Powers of Attorney in Scotland.

Setting up a power of attorney is not solely for older adults. Illnesses, accidents, or unexpected events can happen at any age. Having a power of attorney in place ensures that decisions about your everyday finances, property transactions, and medical care can be made swiftly and smoothly by someone you trust.

Types of lasting power of attorney (LPA)

1. Property and Financial Affairs LPA: Covers money matters such as managing bank accounts, paying bills, collecting benefits, or selling property.

2. Health and Welfare LPA: Covers personal welfare decisions, including healthcare, medical treatments, and living arrangements.

Benefits of setting up powers of attorney

• Continuity: Your bills, mortgage, and investments continue to be managed without disruption.

• Control: You choose who acts on your behalf and how much authority they have.

• Avoids deputyship: If you lack capacity and do not have an LPA, family may need to apply to the Court of Protection for a deputyship, which is more time-consuming and expensive.

Key considerations

• Choosing attorneys: Opt for people you trust—often a spouse, relative, friend, or professional like a solicitor—who are over 18 and capable of handling finances responsibly.

• Scope of power: You can limit or specify which decisions your attorneys can make and under what circumstances.

• Registration: An LPA must be registered with the Office of the Public Guardian (OPG) before it can be used.

Creating a robust power of attorney

• Use official forms: In England and Wales, forms from GOV.UK guide you through the process.

• Certificate provider: A third party who confirms you understand what the LPA entails and are not under undue pressure.

• Discuss with attorneys: Open communication helps ensure they know your preferences and the extent of their responsibilities.

Powers of attorney provide vital legal protection and peace of mind, ensuring someone you trust can act for you if needed. Integrating LPAs into your broader estate plan can help prevent costly and emotionally draining legal hurdles should circumstances change unexpectedly. Whether you are managing a small property portfolio or simply looking to secure your day-to-day finances, putting a power of attorney in place can be an invaluable step toward protecting your interests and those of your family.

Trusts overview

Trusts can be a powerful tool in estate planning, providing flexibility and control over how your assets are managed and distributed. They can help reduce inheritance tax, safeguard money for vulnerable or younger beneficiaries, and even manage business assets. While they are often associated with high-value estates, trusts can benefit a wide range of people looking to streamline their estate and plan for future generations.

What is a trust?

A trust is a legal arrangement where one party (the settlor) transfers assets to trustees who manage those assets for the benefit of specified beneficiaries. Trusts can hold cash, investments, and even property. The settlor outlines the rules of the trust in a deed, specifying how and when beneficiaries can receive funds.

Types of trusts

1. Bare trust: Gives beneficiaries an immediate right to both capital and income. Often used for children until they reach 18.

2. Interest in possession trust: Provides a beneficiary with the right to any income generated by the trust for their lifetime.

3. Discretionary trust: Trustees have the power to decide how to distribute income or capital among beneficiaries. Often used to protect beneficiaries who are not able to manage large sums of money.

4. Mixed trust: Combines elements of more than one type of trust, offering flexibility to tailor distributions.

Key advantages of trusts

• Asset protection: Trusts can protect assets from creditors or divorce settlements in certain circumstances.

• Tax efficiency: Properly structured trusts may help reduce inheritance or capital gains tax.

• Controlled distributions: Useful if beneficiaries are young, have special needs, or if you wish to distribute assets gradually.

Setting up a trust

• Draft a trust deed: Outlining the terms, beneficiaries, and trustees.

• Choose trustees carefully: They must act in the best interests of beneficiaries and manage the trust responsibly.

• Consider tax implications: Some trusts incur immediate or periodic charges. Seek professional advice for complex arrangements.

The role of trustees is crucial. They are legally obliged to follow the trust deed and manage assets diligently. Appointing trustworthy individuals—or professional trustees—ensures decisions align with your wishes and beneficiaries’ needs.

Things to note

• Ongoing administration: Trusts can require annual tax returns and record-keeping, especially for discretionary trusts.

• Potential costs: Professional advice during creation and for annual maintenance is often beneficial but can be expensive.

• Review periodically: Changes in tax law or personal circumstances may necessitate adjustments.

Trusts are neither exclusive to the wealthy nor universally beneficial for everyone. Whether you are safeguarding a modest inheritance for a child or structuring a significant estate to mitigate taxes, trusts can offer a tailored solution. When integrated thoughtfully into your wider estate plan, a trust can help ensure your assets remain protected and distributed in a manner that reflects your personal values and the needs of your loved ones.

Inheritance tax planning

Inheritance Tax (IHT) is a key consideration in UK estate planning. At a standard rate of 40% on the value of your estate above specified tax-free thresholds, it can significantly reduce the amount your beneficiaries receive. However, there are various allowances, exemptions, and strategies to help minimise or eliminate IHT liabilities.

Understanding the nil-rate band and residence nil-rate band

• Nil-rate band (NRB): The threshold at which IHT becomes payable. Currently set at £325,000 for individuals in the UK (HMRC, 2022).

• Residence nil-rate band (RNRB): An additional allowance if you leave your main residence to direct descendants (children, grandchildren). This allowance is currently £175,000.

Combined, a married couple or civil partners can potentially shield up to £1 million from IHT (two nil-rate bands of £325,000 each and two residence nil-rate bands of £175,000 each) if their estates are structured correctly.

Lifetime gifting strategies

Gifting during your lifetime can be an effective way to reduce the value of your taxable estate. Certain exemptions exist, including:

• Annual exemption: You can give away up to £3,000 per year without it counting towards your estate’s taxable value.

• Wedding/civil partnership gifts: Gifts of up to £5,000 to a child getting married, £2,500 to a grandchild, or £1,000 to others are exempt.

• Potentially exempt transfers (PETs): If you survive seven years after making a larger gift, it becomes fully exempt from IHT.

Trusts for tax efficiency

Trusts can sometimes reduce or defer IHT by removing assets from your estate, depending on the type of trust used. Discretionary trusts, for instance, allow you to spread out distributions, potentially avoiding a large tax bill at once. However, complex rules and periodic charges apply, so it is advisable to consult a specialist if considering trust structures for tax planning.

Reliefs for business owners

• Business Relief (BR): Formerly known as Business Property Relief (BPR), can reduce the value of certain business assets by 50% or 100% for IHT purposes.

• Agricultural Relief (AR): Provides relief on the agricultural value of qualifying land or property.

Overview of key IHT reliefs

Practical tips

1. Write a will: Critical for utilising allowances effectively.

2. Use life insurance: To cover potential IHT liabilities, ensuring beneficiaries can pay any tax bill without having to sell key assets.

3. Regular reviews: Tax laws evolve, and your personal circumstances may change.

4. Document gifts: Keep detailed records of any gifts made and reference the date and purpose.

Inheritance Tax planning is a complex area influenced by changing legislation and personal factors like marital status, property ownership, and business interests. By taking proactive steps and seeking expert advice, you can optimise your estate to reduce IHT liabilities, thus leaving a larger legacy for your beneficiaries.

Probate process

Probate is the legal and financial process of dealing with the property, money, and possessions of someone who has passed away. In England and Wales, if you are named an executor in a will, you typically need to apply for a Grant of Probatebefore you can administer the estate. In Scotland, the equivalent process involves applying for Confirmation through the Sheriff Court. Although procedures and terminology may vary slightly across the UK, the fundamental objective is the same: to confirm the executors’ authority to settle the deceased person’s affairs.

When is probate required?

Probate is often required if the deceased owned property, significant financial assets, or if institutions like banks or insurance providers demand to see a Grant of Probate before releasing funds. However, it may not be necessary for smaller estates or those held jointly (e.g., a joint bank account or property owned as joint tenants) because assets pass automatically to the surviving co-owner.

Applying for probate

1. Value the estate: Executors must compile an inventory of the deceased’s assets and liabilities, including bank accounts, investments, property, and debts.

2. Complete tax forms: HMRC requires accurate reporting of the estate’s value, whether or not Inheritance Tax is due.

3. Submit probate application: Provide the death certificate, the will, and any supporting documents.

4. Grant of Probate: Once approved, the executor receives legal authority to manage the estate.

Executing the estate

• Collect assets: Executors gather funds from bank accounts, sell or transfer property, and manage investments.

• Settle debts and expenses: This includes funeral costs, outstanding bills, and any tax liabilities.

• Distribute to beneficiaries: Once all debts are settled, the executor can distribute remaining assets according to the will.

Executors should keep detailed records and may want to open a dedicated executor bank account to handle estate transactions. This helps maintain transparency and avoid mixing personal funds with estate money.

Delays and complications

Probate can be delayed due to:

• Complex estates: Involving overseas assets, trusts, or disputes among beneficiaries.

• Missing beneficiaries: Executors must make reasonable efforts to locate all beneficiaries.

• Will disputes: Challenges to the will’s validity or content can halt proceedings.

Understanding probate can help executors and beneficiaries navigate a potentially stressful time more confidently. Proper organisation, timely communication, and thorough documentation are vital to ensure the deceased’s wishes are fulfilled efficiently and in line with UK law.

Lifetime gifting strategies

Lifetime gifting is a method of distributing parts of your estate before you pass away, often to reduce inheritance tax or to provide financial support to loved ones when they need it most. This strategy is becoming increasingly popular in the UK, with people recognising that financial assistance during life can be as valuable—if not more so—than leaving a legacy in a will.

Benefits of gifting during your lifetime

1. Lower inheritance tax: By reducing the total value of your estate, you may lower or eliminate the amount subject to IHT.

2. Support loved ones earlier: Gifting allows beneficiaries to receive help with major life events like education, home purchases, or wedding expenses.

3. Personal fulfilment: You get to witness the positive impact of your gift first-hand.

Gift exemptions and rules

• Annual exemption: You can give away up to £3,000 per tax year free of IHT, plus unused allowance from the previous year.

• Small gift allowance: Up to £250 per year per person, to as many different people as you like.

• Potentially Exempt Transfers (PETs): Any gift not covered by an exemption becomes fully exempt if you survive seven years after making it. If you die within seven years, a sliding scale of IHT (taper relief) may apply.

• Wedding gifts: £5,000 to a child, £2,500 to a grandchild, or £1,000 to others can be exempt in the year of the wedding.

Taper relief on PETs

Risks and considerations

• Loss of control: Once you gift an asset, you cannot take it back. If you become financially vulnerable later, you may not have the resources you need.

• Deprivation of assets: Local authorities may investigate if you gift large sums and then claim means-tested benefits like care support.

• Record-keeping: Maintaining detailed records of gifts, including dates and amounts, is essential for estate administration and potential tax queries.

Practical strategies

• Make smaller, regular gifts: If you can afford it, gifting within your annual exemptions is a straightforward way to reduce your estate.

• Use surplus income: Regular gifts from your disposable income can be exempt from IHT if they do not affect your standard of living.

• Consider trusts: If you are worried about losing control or want to specify how a gift should be used, a trust may be more suitable.

Making gifts can be an emotionally rewarding method of passing on wealth. However, it requires careful planning, sound financial advice, and awareness of complex tax rules. By structuring your lifetime gifts thoughtfully, you can maximise the benefits for loved ones while retaining enough resources for your own financial security.

Protection for vulnerable beneficiaries

Estate planning goes beyond simply dividing assets. It also involves proactively safeguarding beneficiaries who may need extra support—this includes children under 18, adults with disabilities, or family members who struggle with managing money. Creating structures like trusts, appointing guardians, and clarifying instructions in your will can ensure these individuals receive the care and financial stability they deserve.

Identifying vulnerable beneficiaries

• Minors: Children under 18 cannot legally manage substantial inheritances.

• Adults with disabilities: Physical or mental impairments can necessitate long-term financial oversight.

• Individuals with financial instability: A history of debt, addiction, or poor money management can jeopardise inheritance.

By recognising these vulnerabilities, you can tailor your estate plan to protect them effectively.

Trusts as a protective measure

Discretionary trusts are often used because they allow trustees to decide how and when the funds are distributed, adapting to changing circumstances. Trustees can also control how funds are spent, ensuring money goes towards essentials like accommodation, healthcare, and education.

Disabled person’s trust: A special type of trust that may offer tax advantages when the beneficiary is defined as disabled under UK law. This can help reduce Inheritance Tax while also potentially granting the beneficiary access to means-tested benefits.

Appointing guardians for minors

If you have children under 18, appointing a legal guardian in your will ensures they have a safe environment to grow up in should both parents pass away. Guardians have the legal authority to make decisions about health, education, and general welfare. It's wise to choose someone who shares your values and is capable of taking on the financial and emotional responsibility.

Using powers of attorney

For adult beneficiaries who may lose capacity or need help managing day-to-day affairs, setting up a Lasting Power of Attorney (LPA) could be beneficial. Though primarily used to protect your own interests, LPAs can also be arranged for vulnerable adults if they have the mental capacity to grant it. This ensures a trusted individual can make important decisions on their behalf.

Practical steps to enhance protection

1. Seek expert advice: Solicitors experienced in Court of Protection matters or vulnerable persons law can offer tailored solutions.

2. Maintain clarity in legal documents: The clearer your instructions, the fewer disputes arise later.

3. Regular reviews: Circumstances can change quickly. Update your plan if a beneficiary’s condition changes or if new vulnerabilities emerge.

4. Consider a letter of wishes: While not legally binding, it can guide trustees and guardians, providing insight into how you want funds used or how dependants should be cared for.

Protecting vulnerable beneficiaries is both a legal and moral responsibility. With the right structures, you can ensure your loved ones receive not just financial stability, but also the ongoing care and support they require—fostering an environment where they can thrive, even in your absence.

Business succession planning

For business owners, estate planning doesn’t stop at personal assets. If you have shares in a company, are a sole trader, or part of a partnership, you need a business succession plan to ensure continuity, protect employees, and maintain the firm’s value for your beneficiaries. Failure to plan can lead to operational confusion, disputes, and a possible decline in the business’s worth.

Why business succession matters

• Protects your legacy: Ensures the business you built or contributed to remains in capable hands.

• Minimises disruption: Clear instructions can reassure customers, suppliers, and employees.

• Tax advantages: Proper structuring may allow your estate to benefit from Business Relief, significantly reducing Inheritance Tax.

Key components of a succession plan

1. Leadership transition: Identify who will take over leadership roles—whether family members, key employees, or external buyers.

2. Valuation of the business: Obtain a professional valuation to ensure fair tax and inheritance considerations.

3. Shareholder agreements: If you co-own a business, a shareholder or partnership agreement can clarify what happens to your shares on death or retirement.

4. Funding mechanisms: Life insurance policies or partnership insurance can provide liquidity to buy out shares from your estate, preventing forced sales.

Passing the business to family

In family-run enterprises, you may wish for children or relatives to inherit ownership. This can involve:

• Gradual transition: Children might start in junior roles, eventually assuming leadership.

• Trusts for shares: Placing shares in trust for underage or vulnerable family members, managed by trustees until they are ready to take control.

• Clear roles: If multiple family members are involved, define their duties to avoid conflicts.

Methods of transferring a business

Business Relief (BR)

BR is a critical part of business succession. Shares in qualifying trading companies and certain business assets can attract relief at either 50% or 100%. A family-owned trading company typically qualifies for 100% relief, meaning no IHT is due on the portion of the estate tied to the business. However, investment companies typically do not qualify, so structuring matters significantly.

Updating your plan

Circumstances in business can change overnight—new products, expansions, or even economic downturns can alter valuations and the viability of successors. Regularly reviewing and updating your succession plan helps ensure it remains relevant and aligned with both personal wishes and market realities.

Business succession planning is about more than just tax efficiency; it is about preserving the identity of the company you have built, ensuring the welfare of employees, and providing stability for your family. With a structured approach, you can minimise the risks associated with transition, maintain the value of your life’s work, and pass on a thriving enterprise to the next generation or chosen successors.

Planning for digital assets

In our increasingly online world, digital assets have become a significant part of personal estates. These can include social media accounts, digital photos, emails, cryptocurrencies, online banking, e-commerce stores, and domain names. Unfortunately, many people overlook digital assets when crafting their estate plans, leaving executors and beneficiaries without the authority or knowledge to access or manage them.

Why digital assets matter

• Monetary value: Cryptocurrencies and online businesses can be worth substantial sums.

• Emotional value: Family photos, personal documents, or creative works stored online may have priceless sentimental worth.

• Data security: Failing to plan can lead to data loss, identity theft, or unauthorised access.

Identifying your digital estate

Compile a list of all digital platforms, services, and devices you use. For each, note the following:

• Login credentials: Username, password, recovery information.

• Two-factor authentication: If enabled, detail how someone might access the codes.

• Ownership or subscription model: Clarify whether content is owned or merely licensed (many digital media platforms only grant a licence to use content, which terminates on death).

Strategies to secure digital assets

1. Digital asset inventory: Keep a secure, up-to-date list of accounts and passwords. Consider storing this in an encrypted file or password manager.

2. Nominate a digital executor: Someone technically savvy who understands the value and locations of your online assets. They may differ from the main executor of your will.

3. Use online tools: Some platforms, like Facebook’s “legacy contact,” allow you to appoint someone to manage your account post-death.

4. Incorporate in your will: Include general instructions about how your digital assets should be handled, but avoid listing sensitive login details in the will (as it becomes a public document during probate).

Legal challenges

Different platforms have varying policies on account access after death. For instance, a provider may lock accounts immediately upon receiving notice of the user’s death, complicating asset retrieval. Executors need documentation that proves their authority, and they must adhere to privacy laws like the General Data Protection Regulation (GDPR).

Best practices

• Consult professionals: A solicitor familiar with digital asset management can offer valuable guidance.

• Regular updates: Passwords and platform usage can change quickly; update your digital asset inventory at least annually.

• Communicate instructions: Let your executor or trusted family members know that these digital assets exist and where to find your inventory.

In the digital age, neglecting these assets can lead to lost inheritance, overlooked liabilities, or emotional distress for loved ones unable to retrieve cherished memories. By systematically identifying and securing your digital footprint, you ensure that your overall estate plan remains comprehensive, up-to-date, and reflective of modern realities.

Pension considerations

Pensions are a vital component of UK estate planning, often representing one of the largest assets many individuals hold. However, they differ from other parts of your estate in how they can be passed on and taxed. By understanding the rules surrounding pension inheritance, you can help ensure your retirement savings continue to benefit your loved ones in the most tax-efficient manner possible.

Types of pensions and inheritance

• Defined Contribution (DC) schemes: These include workplace pensions under auto-enrolment and private pensions you fund yourself. Typically held in a pension pot, your remaining funds can often be passed on to beneficiaries.

• Defined Benefit (DB) schemes: Also known as final salary schemes, these promise a set income in retirement. In some cases, a portion may continue to a spouse or dependants, but the benefits vary based on scheme rules.

Tax treatment of inherited pensions

1. Age at death: If you die before age 75, beneficiaries can generally inherit your pension pot tax-free. After 75, they may pay income tax on withdrawals at their marginal rate.

2. Pension flexibility: Drawdown pensions allow beneficiaries to keep the inherited pot invested, withdrawing only when they choose, potentially minimising tax.

3. Lump sum: Alternatively, beneficiaries can take a lump sum, but this could push them into a higher tax bracket if taken after your 75th birthday.

Nominating beneficiaries

Most modern pension providers let you complete an expression of wish or nomination form to indicate who should inherit your pension. While not legally binding, trustees or scheme administrators usually follow these instructions unless there is a compelling reason not to.

Planning strategies

1. Consolidate pensions: If you have multiple DC pensions, consolidating can simplify administration and make it easier to track. Check for exit fees or lost benefits before consolidating.

2. Use drawdown: A drawdown arrangement can offer flexible benefits for both you and your beneficiaries.

3. Regularly update nominations: Life events like marriage, divorce, or the birth of a child necessitate revisiting your beneficiary forms.

4. Seek advice: Pension rules and tax legislation can be complex. A financial adviser can help optimise your approach.

Avoiding common pitfalls

• Overlooking death benefits: Some older pension schemes may have restrictive or unfavourable terms.

• Tax rate changes: If you pass away after 75, it could significantly affect the tax position of your beneficiaries.

• Misaligned nominations: Failing to update expression of wish forms could result in benefits going to the wrong person, especially after relationship changes.

Ensuring your pension aligns with your overall estate plan is crucial for protecting the financial future of your loved ones. By understanding the specific rules and tax advantages that govern pension inheritance, you can maximise the value of your retirement savings for the next generation.

Life insurance and protection

Life insurance forms an essential pillar of estate planning, providing a financial safety net for dependants should you pass away. A life insurance policy can help cover funeral costs, pay off a mortgage, or maintain a family’s standard of living. When integrated with an effective estate strategy, it also helps mitigate inheritance tax liabilities and smooth the transfer of wealth.

Types of life insurance

1. Term life insurance: Provides coverage for a specified term—such as 10, 20, or 30 years. If you pass away during that term, the policy pays out. After the term expires, no payout is made.

2. Whole-of-life insurance: Covers you for your entire lifetime, ensuring a payout whenever you die, as long as premiums are up to date.

3. Family income benefit: Pays a regular income rather than a lump sum, often used to provide for dependants’ living expenses.

Writing life insurance in trust

A highly effective strategy to reduce or avoid inheritance tax on a life insurance payout is to write the policy “in trust.” This means:

• Policy proceeds fall outside your estate, avoiding probate delays.

• Beneficiaries receive the payout quickly, often within weeks.

• The sum is typically free from IHT, as it is owned by the trust, not you personally.

Note: You must do this at the outset of the policy or amend it subsequently with a trust deed. Professional advice is recommended, as errors can lead to unintended tax consequences.

Other forms of protection

• Critical illness cover: Provides a lump sum if you are diagnosed with a serious condition like cancer or a heart attack, allowing you to cover medical expenses or adapt your home.

• Income protection: Pays a percentage of your salary if you are unable to work due to illness or injury.

Premium affordability and review

Regularly review your cover as family circumstances evolve. Major events like marriage, the birth of a child, or taking on a mortgage can necessitate increasing or decreasing your life cover. Failing to keep the policy updated could leave dependants underprotected or result in you paying for more cover than needed.

Balancing cost and benefit

• Shop around: Premiums can vary widely between providers.

• Consider group policies: Some workplaces offer discounted or free life cover, though this may cease when you change jobs.

• Review regularly: As your financial situation changes, align your life insurance with your current needs and estate planning objectives.

By combining the appropriate life insurance policy with trusts and other estate planning tools, you can protect your family from immediate financial strain and safeguard long-term wealth. Comprehensive coverage can alleviate emotional stress, ensuring that money worries do not compound the pain of losing a loved one.

Funeral planning and costs

Planning a funeral is often emotionally challenging for loved ones, but setting out your wishes in advance can bring clarity and financial security. Costs can vary significantly—according to the SunLife Cost of Dying Report 2023, the average funeral in the UK costs around £4,056, with variations based on location and preferences (SunLife, 2023). Incorporating funeral arrangements into your estate plan helps ensure your final send-off aligns with your beliefs, cultural practices, and budget.

Why funeral planning is important

1. Reduce emotional burden: Loved ones already coping with grief may struggle to make decisions. Pre-planning eases that responsibility.

2. Financial clarity: Clarity on costs helps avoid disputes or confusion.

3. Reflect your personal values: You can specify religious or cultural rites, music, readings, and even eco-friendly burial preferences.

Ways to cover funeral expenses

• Prepaid funeral plans: A contract with a funeral provider allowing you to lock in costs at current prices, safeguarding against inflation.

• Insurance policies: Some over-50s plans or whole-of-life policies are specifically marketed to cover funeral costs.

• Savings or investment accounts: Earmarking funds that your family can easily access upon your death ensures immediate liquidity.

• Estate assets: Your executor can use available estate funds, but these might not be released until probate is granted, causing potential delays.

Typical funeral cost breakdown

Communication and documentation

• Include your wishes in a letter: While funeral requests in your will are not legally binding, they offer guidance to executors. Alternatively, maintain a separate document outlining your preferences.

• Discuss with family: Talking openly about your funeral plan ensures everyone understands and respects your decisions.

• Record location of any plan documents: Whether it’s a contract with a funeral provider or a final letter of wishes, make sure executors or family members know where to find them.

Alternative memorial options

Modern funerals are no longer confined to traditional services. If you have a specific vision—like a woodland burial, scattering ashes in a beloved location, or a “celebration of life” event—detail these desires. Eco-friendly alternatives like biodegradable urns or direct cremations are also gaining popularity as people seek more personal or sustainable farewells.

Thoughtful funeral planning not only protects your loved ones from unexpected costs but also ensures your final farewell is as you desire. By aligning funeral arrangements with the broader estate plan, you create a cohesive, empathetic approach that supports those you leave behind at every step.

Reviewing and updating your estate plan

An estate plan is not a static document; it should evolve with your life circumstances. Whether you have acquired new assets, experienced changes in family dynamics, or updated your personal beliefs, regularly reviewing and updating your estate plan ensures it remains fit for purpose. Many experts advise revisiting your plan every three to five years, or sooner if a major event occurs.

Why reviews are essential

1. Reflecting life changes: Events like marriage, divorce, childbirth, or the death of a loved one can shift inheritance priorities.

2. Legal and tax changes: UK laws on inheritance tax, trusts, and probate procedures may evolve. Staying current prevents unintentional tax bills.

3. Accurate asset records: Over time, you might acquire or dispose of property, investments, or business interests, impacting your estate’s value and structure.

Common triggers for an update

• Marriage or civil partnership: In England and Wales, marriage usually revokes a will unless it expressly states it was made in contemplation of marriage.

• Divorce or separation: Your ex-spouse may lose entitlement to certain estate assets, but it’s crucial to amend legal documents promptly.

• Birth or adoption of children: Necessitates adding guardians, new beneficiaries, or trust provisions.

• Change in financial situation: A sudden inheritance, property purchase, or business expansion can alter IHT implications.

• Health concerns: Diagnoses or diminished capacity could lead to revisiting powers of attorney or trust arrangements.

Steps for an effective review

1. Reassess executors and guardians: Are these individuals still best suited for their roles?

2. Evaluate existing trusts: Confirm they continue to serve your objectives and remain compliant with current laws.

3. Check nomination forms: Update pension and life insurance beneficiaries.

4. Inventory assets: Add or remove assets, such as newly acquired property or liquidated investments.

Avoiding conflicts and disputes

Communicating updates to key individuals, like executors or family members, can help avert misunderstandings. While you are not obliged to share the details of your plan, it can be beneficial to explain the rationale behind significant changes. This transparency reduces the likelihood of disputes during probate.

Continual refinement of your estate plan is a hallmark of thorough, proactive planning. By reviewing documents, adjusting to evolving legislation, and accounting for changes in personal circumstances, you ensure your legacy is consistently protected and aligned with your current wishes.

Seeking professional advice

Estate planning is inherently complex, involving legal, financial, and emotional considerations. While basic estate planning tasks—like writing a simple will—may be manageable independently, professional solicitors, financial advisers, and tax specialists bring essential expertise to more complicated situations. Enlisting their guidance can not only ensure your plan is legally valid and tax-efficient but also save time and reduce stress.

Types of professionals to consider

1. Solicitors: Draft and review wills, trusts, and powers of attorney. They can also manage probate and advise on guardianship arrangements.

2. Financial advisers: Help select suitable life insurance policies, pension options, and investment strategies to protect and grow your estate.

3. Tax advisers/accountants: Offer strategies for minimising inheritance tax and other levies, and ensure compliance with HMRC regulations.

Benefits of expert input

• Technical know-how: Professionals understand the nuances of UK law and HMRC guidelines.

• Tailored solutions: They recommend structures and strategies suited to your personal circumstances and goals.

• Minimised risk: Avoid costly mistakes that could invalidate a will or lead to higher tax bills.

• Continuous support: Ongoing advice is beneficial as tax laws and personal situations evolve.

When to consult an expert

• Significant assets: Large or diverse holdings, including international property, complex investments, or business interests.

• Family complexities: Blended families, estranged relatives, or vulnerable beneficiaries.

• Tax-efficiency goals: Use of trusts, lifetime gifts, and business relief might require specialist advice.

• Contested estates: If you suspect your will could be challenged, pre-emptive professional input can help mitigate disputes.

Working collaboratively

Professionals often collaborate—solicitors team up with financial planners, or tax advisers liaise with wealth managers—ensuring a holistic approach to your estate plan. This synergy can identify potential pitfalls and create seamless strategies that address your short-term and long-term objectives.

Ultimately, though certain estate planning tasks may be handled on your own, employing professional expertise offers reassurance and can yield considerable financial advantages. With the right guidance, you can craft a plan that meets your needs, complies with UK legislation, and provides long-term security for your family.

Common mistakes and how to avoid them

Even the most well-intentioned individuals can slip up when putting together an estate plan. From overlooking vital legal requirements to miscalculating tax implications, these pitfalls can result in delays, disputes, and unnecessary costs for your beneficiaries. Being aware of common missteps can help you safeguard your estate’s smooth transfer.

1. Failing to make a will

Mistake: Dying intestate means your assets are distributed according to UK intestacy rules, which may not align with your wishes.
Avoid it: Draft a valid will as soon as possible, even if your estate is modest or straightforward. Regularly update it as your circumstances change.

2. Not naming substitute executors

Mistake: Executors may be unable or unwilling to act when the time comes, leaving the estate administration in limbo.
Avoid it: Appoint backup executors and gain their consent in advance. Document your choices clearly in your will.

3. Overlooking digital assets

Mistake: Valuable online accounts, cryptocurrencies, or sentimental digital content remain inaccessible, causing frustration and potential financial loss.
Avoid it: Create a digital assets inventory and share access instructions securely with a trusted individual.

4. Incorrect assumptions about jointly held property

Mistake: Believing all co-owned properties automatically pass to the co-owner. In fact, the way a property is owned—joint tenants or tenants in common—matters.
Avoid it: Check the title deeds. If you are tenants in common, your share passes through your will, not automatically to the co-owner.

5. Ignoring inheritance tax planning

Mistake: Paying unnecessary taxes that reduce the estate value for beneficiaries.
Avoid it: Learn about allowances (nil-rate band, residence nil-rate band) and consider trusts or lifetime gifts if they align with your circumstances.

6. Naming minors as direct beneficiaries

Mistake: Children under 18 cannot inherit directly. Funds could be held in limbo, requiring a court-appointed trustee.
Avoid it: Use trusts or appoint trustees in your will, ensuring that minors’ inheritance is well-managed until they come of age.

7. Forgetting to review and update regularly

Mistake: A will drafted years ago may no longer reflect your family situation or asset base.
Avoid it: Review your estate plan every few years or after major life events like marriage, divorce, or property purchase.

A comprehensive estate plan is only as good as the detail and care you invest in its creation and maintenance. By understanding these pitfalls and making proactive adjustments, you can help ensure your final wishes are carried out swiftly, accurately, and with minimal strain on your loved ones.

Conclusion

Estate planning is a vital process for ensuring that your legacy is preserved and distributed according to your wishes, while also reducing potential stress and financial burdens on those you leave behind. By carefully considering each component—from wills and executors to trusts, powers of attorney, and inheritance tax planning—you lay the foundation for a smoother transition at a challenging time.

Throughout this guide, we have explored the practical steps necessary to protect and manage your estate, highlighting the importance of regular reviews and professional advice. Whether you possess modest assets or manage a complex estate with business interests, the principles remain the same: clarity, preparation, and ongoing attention to changing circumstances.

Ultimately, a well-structured estate plan provides peace of mind, minimises conflicts, and safeguards your hard-earned wealth for the people or causes that matter most to you. By proactively engaging with each section of this guide, you will be better equipped to make informed decisions that reflect your unique values and financial situation.

Frequently Asked Questions

Estate planning basics

Why is estate planning important?

Estate planning ensures your assets are distributed in line with your wishes and offers peace of mind that loved ones and dependants will be looked after. It also helps manage tax liabilities and reduces the administrative burden on your family during a difficult time.

Can I change my estate plan later?

Yes. Your estate plan should be reviewed and updated regularly, especially after major life events such as marriage, divorce, the birth of a child, or the acquisition of significant assets. This ensures it accurately reflects your current wishes and circumstances.

What documents should be part of my estate plan?

Key documents typically include a will, powers of attorney, and any trust deeds. You may also include a letter of wishes to guide executors or trustees, alongside up-to-date nomination forms for pensions or life insurance policies.

Does estate planning only matter if I’m wealthy?

No. Even modest estates benefit from structured planning. A valid will, powers of attorney, and other measures can prevent legal complications and protect your family from unnecessary stress, regardless of your net worth.

Wills and probate

How does probate work if I own property outside the UK?

If you have assets in multiple countries, you may need separate probate proceedings or equivalent legal processes in those jurisdictions. It is often wise to seek international legal advice to ensure local rules are followed correctly.

Can an executor also be a beneficiary?

Yes. An executor can inherit from your estate. Many people choose close family members for both roles, as long as there is clarity about responsibilities and potential conflicts of interest are managed properly.

What happens if my executor dies before me?

If your chosen executor passes away before you, they cannot act. That’s why appointing substitute executors or including backup provisions in your will is crucial, ensuring continuity in estate administration.

Do I need probate if my estate is small?

It depends. Some financial institutions may release funds without requiring probate if the sums involved are relatively small. However, if property is involved or if certain organisations insist on seeing a Grant of Probate, the process is usually unavoidable.

Trusts and gifting

How does a discretionary trust protect my family?

In a discretionary trust, the trustees decide how and when to distribute funds based on beneficiaries’ circumstances. This setup can safeguard assets for children, protect vulnerable beneficiaries, and potentially offer tax advantages.

Is a trust only for reducing inheritance tax?

Not always. While certain trusts can help with tax planning, trusts also serve other purposes, such as asset protection or providing for relatives who cannot manage their own finances. They can also ensure privacy and control over how your assets are used.

Can I use a trust for my family home?

Yes. Some homeowners place property into a trust to streamline inheritance or protect the home for future generations. However, property trusts are subject to complex rules, particularly around Inheritance Tax and potential care costs, so professional advice is essential.

Can I gift my assets to avoid care home fees?

Local authorities may view large or systematic gifts as “deliberate deprivation of assets” if they believe you gifted property or savings specifically to avoid fees. This could result in your application for care funding being denied. Always seek specialist advice in these situations.

Tax considerations

Is there a tax advantage to making lifetime gifts?

Yes. By gifting assets during your lifetime, you may reduce the value of your estate for Inheritance Tax purposes. Certain exemptions exist—such as the annual gift allowance—and larger gifts can become tax-free if you survive for seven years after making them.

How does Business Relief affect Inheritance Tax?

Business Relief can reduce the taxable value of qualifying business assets by up to 100%. This can be particularly advantageous for owners of trading businesses or shares. However, strict criteria apply, and not all businesses are eligible.

What is the residence nil-rate band?

The residence nil-rate band is an additional allowance that applies when you leave your main home to direct descendants, such as children or grandchildren. It can significantly increase the total value of your estate that’s shielded from Inheritance Tax.

Can I claim more than one type of relief on the same asset?

In most cases, you cannot stack multiple reliefs on a single asset for Inheritance Tax. The rules can be complex, and allowances may overlap, so consulting a tax professional is recommended to optimise your estate’s relief potential.

Other considerations

What if my spouse isn’t good with finances?

You can use measures like trusts or appoint professional co-trustees to manage assets on your spouse’s behalf. Additionally, setting up a Lasting Power of Attorney for financial decisions may help if they later lose capacity or need assistance with everyday money matters.

How are digital assets handled after death?

Digital assets often require specific instructions. Many online services have policies around deceased users’ accounts. Appointing a digital executor and maintaining a secure log of login details can ease the process of transferring or shutting down online accounts.

Can powers of attorney continue after I die?

No. Powers of attorney end when you die. At that point, your will (if you have one) becomes the guiding legal document, and your executor(s) take over the responsibility of administering your estate.

What happens to my pets if I pass away?

Pets are considered property under UK law. You can name a guardian in your will and set aside funds for their care. Alternatively, some charities offer rehoming services that you can outline in your estate plan.

Are debts passed on to my beneficiaries?

Beneficiaries generally inherit only what remains in the estate once debts, taxes, and other liabilities have been settled. If the estate is insolvent, debts are paid out of available assets, and beneficiaries may end up receiving nothing.

Should I share my estate plan with family?

It’s a personal choice. Sharing the broad outline can help prevent surprises and disagreements later. However, it is not legally required. If you do discuss it, ensure your wishes are clearly documented to avoid disputes.

What if my child has special educational needs?

A trust can ensure a child with special educational needs is financially supported throughout their schooling and beyond. You could also arrange for professional trustees to assist with managing funds if your child lacks capacity or financial experience.

Can I disinherit a family member?

You generally have the right to leave your estate to whomever you wish. However, certain relatives and dependants may claim under the Inheritance (Provision for Family and Dependants) Act 1975 if they believe they have not been adequately provided for. Legal advice is prudent in these cases.

Still have questions?

If you’ve read through this guide and find that you still need more clarity or have questions specific to your personal circumstances, you may want to speak with an expert. Complex family arrangements, blended families, or business interests can all add layers of detail that warrant personalised advice.

Instead of trying to navigate these nuances alone, consider consulting with a professional who can tailor recommendations to your unique situation. From exploring the best trust options for vulnerable beneficiaries to understanding detailed Inheritance Tax implications, expert insight can help you create a robust plan with confidence.

Whether you’re just starting out or need to update an existing plan, speaking to an experienced adviser, solicitor, or financial planner could give you the reassurance you need to move forward. By taking that step, you can ensure every aspect of your estate planning is taken care of—providing you and your loved ones with peace of mind now and in the future.

Glossary

Administrator

An individual appointed by the court to manage the estate of a person who died without a valid will (intestate). The administrator gathers the deceased’s assets, pays debts, and distributes the remainder according to intestacy laws.

Asset

Anything of value owned by an individual, such as property, cash, investments, personal belongings, or business interests. Assets form part of the total estate when planning or administering an inheritance.

Attorney

A person granted authority under a power of attorney to make financial, health, or welfare decisions on behalf of someone else. An attorney’s responsibilities can include managing finances, paying bills, or arranging care services.

Beneficiary

A person or organisation that is named to receive assets, funds, or benefits from an estate, trust, or life insurance policy. Beneficiaries have a legal right to the inheritance once the estate is settled or the trust is administered.

Business Relief

A form of inheritance tax relief in the UK that can reduce the taxable value of qualifying business assets by up to 100%. It often applies to shares in trading companies or certain types of business property and helps to maintain continuity of family enterprises.

Codicil

A legal document used to make minor alterations or additions to an existing will. A codicil must be signed and witnessed in the same way as the original will. Major changes often require drawing up a new will.

Court of Protection

A specialist court in England and Wales that makes decisions on financial or welfare matters for individuals who lack the mental capacity to do so themselves. It can appoint deputies and supervise their actions.

Deed of Variation

A legal instrument allowing beneficiaries to adjust the distribution of a deceased person’s estate after death, often for tax or family reasons. Beneficiaries must agree, and it generally must be completed within two years of the death.

Dependant

An individual—such as a child, spouse, or another relative—who relies on someone for financial support. In estate planning, dependants may have certain rights under the Inheritance (Provision for Family and Dependants) Act 1975.

Digital asset

Any electronically stored content with personal or financial value, such as emails, social media accounts, digital photos, and cryptocurrencies. Digital assets can form part of a person’s estate and require specific instructions for management after death.

Digital executor

A person tasked with handling or overseeing digital assets after death. While not always formally recognised in UK law, naming a digital executor can guide how online accounts and digital files are managed or distributed.

Discretionary trust

A type of trust where trustees have discretion to decide how and when beneficiaries receive income or capital. It offers flexibility in accommodating changing circumstances of beneficiaries and can be useful for tax planning.

Domicile

The country a person treats as their permanent home, often used to determine which tax rules and succession laws apply to their estate. Domicile can be complex when individuals have lived or owned property in multiple countries.

Estate

All the money, property, belongings, and other assets owned by an individual at the time of their death. Debts and liabilities also form part of the estate before the net value is calculated for distribution.

Estate administration

The process of collecting the deceased’s assets, paying outstanding debts and taxes, and distributing any remaining balance to beneficiaries. It includes applying for probate or letters of administration if necessary.

Executor

A person named in a will to carry out the instructions of the deceased, including applying for probate, settling debts, and distributing the estate. Executors have legal authority to administer and finalise the estate.

Expression of wish

A written statement (often used in pensions or life insurance) indicating who should inherit the proceeds on death. While not legally binding in all scenarios, trustees or insurers typically follow the wishes unless there is a strong reason not to.

Gift inter vivos

A transfer of assets made during a person’s lifetime rather than after death. Such gifts can have tax implications, particularly if the donor passes away within seven years of making the gift.

Grant of letters of administration

A legal document issued by a court when someone dies without a valid will (intestate), authorising an administrator to collect and distribute the estate’s assets according to intestacy laws.

Grant of probate

A legal document confirming an executor’s authority to manage the estate according to the will. It is often required by banks and financial institutions before they release funds or close accounts belonging to the deceased.

Guardianship

A legal responsibility given to a person (guardian) to care for a minor or vulnerable individual in areas like housing, education, and well-being. Guardians are typically appointed in a will or by the court.

Hereditament

Historically used to refer to any property that could be inherited. In modern legal contexts, it mainly appears in older deeds or documents as a reference to assets capable of passing to heirs.

HMRC

Her Majesty’s Revenue and Customs, the UK government department responsible for collecting taxes, including Inheritance Tax. HMRC sets rules for IHT exemptions, reliefs, and compliance.

Inheritance (Provision for Family and Dependants) Act 1975

A UK law that allows certain individuals to claim from an estate if they feel they haven’t been reasonably provided for, even if the will or intestacy rules exclude them. Common applicants include spouses, children, and long-term partners.

Inheritance Tax

A tax charged on the estate of someone who has died, generally levied at 40% on amounts above the nil-rate band. Various exemptions, reliefs, and allowances can reduce the effective tax burden on beneficiaries.

Intestate

The legal status of a person who dies without having made a valid will. Intestacy laws then determine how the estate is divided, which may not align with the deceased’s personal wishes.

Joint tenants

A form of property ownership where two or more individuals own the entire property jointly. On the death of one owner, their share passes automatically to the surviving co-owner(s), regardless of any instructions in a will.

Lasting power of attorney

A legal document enabling a person (the donor) to appoint one or more attorneys to manage their property and financial affairs or personal welfare decisions if they lose mental capacity.

Lifetime gift

A transfer of money, property, or possessions made by an individual before their death. Certain gifts may reduce the size of the estate for Inheritance Tax purposes if the donor survives for seven years after making them.

Minor

A child under the age of 18 who cannot inherit or manage assets in their own right. Trusts, guardianship, or other legal arrangements are typically put in place to safeguard a minor’s inheritance.

Nil-rate band

The threshold below which an estate does not incur Inheritance Tax. It is currently set at £325,000, though other allowances, such as the residence nil-rate band, can increase the total tax-free amount.

Office of the Public Guardian (OPG)

A UK body that registers lasting powers of attorney and supervises deputies appointed by the Court of Protection. It ensures attorneys and deputies act in the best interests of those who lack mental capacity.

Pension beneficiary nomination

A form used to inform pension trustees or providers who should receive pension benefits after your death. Though not always binding, trustees often follow your nomination unless there is a compelling reason not to.

Potentially exempt transfer

A type of lifetime gift that can become free from Inheritance Tax if the donor lives for seven years after making it. If the donor dies within that period, a sliding scale (taper relief) may apply.

Power reserved

A term indicating that one or more appointed executors choose not to act immediately in administering the estate, but retain the option to step in later if needed.

Probate

A legal process confirming a will’s validity and granting the executor authority to administer the estate. The term is also colloquially used to refer to the wider estate administration process.

Residuary estate

The portion of an estate that remains after debts, taxes, and any specific or pecuniary legacies have been paid. The residuary estate is then distributed to residuary beneficiaries as directed by the will.

Reversionary interest

An interest in a trust or property that will pass back to the original owner or another designated individual once a certain condition or time period ends, such as the death of a life tenant.

Settlor

A person who creates a trust by transferring assets to trustees. The settlor outlines the trust’s terms in a deed, defining how and when beneficiaries can benefit from the trust’s assets.

Taper relief

A reduction in the amount of Inheritance Tax owed on certain gifts if the donor dies between three and seven years after making the gift. The longer the donor survives, the lower the tax rate on that gift becomes.

Tenants in common

A way of owning property jointly, where each owner has a specific, divisible share. When one owner dies, their share passes according to their will, not automatically to the other co-owner(s).

Testamentary capacity

The legal and mental ability to make or change a valid will, requiring that a person understands the nature of a will, the extent of their property, and how the will may affect beneficiaries.

Trust deed

A legal document establishing a trust and outlining the rules, beneficiaries, and responsibilities of the trustees. It sets out details on how assets should be managed or distributed.

Trustee

An individual or professional body responsible for administering a trust’s assets. Trustees must act in the best interests of the beneficiaries according to the terms of the trust deed.

Will

A written legal document detailing how an individual wants their estate distributed after death. It can also name executors, guardians for minor children, and include funeral preferences.

Useful Organisations

Citizens Advice

Citizens Advice provides free, independent guidance on legal and financial matters, including topics such as drawing up a will, navigating probate, and dealing with inheritance tax issues. Their local branches and online services can offer practical help tailored to individual circumstances.

• Phone: 0800 144 8848

• Website: citizensadvice.org.uk

HMRC (Her Majesty’s Revenue and Customs)

HMRC is responsible for collecting taxes in the UK, including Inheritance Tax, and implementing rules around trusts, gifts, and other estate-planning considerations. Their official website contains up-to-date information and relevant forms for tax submissions.

• Phone: 0300 200 3300

• Website: gov.uk/government/organisations/hm-revenue-customs

The Law Society

The Law Society is the professional body for solicitors in England and Wales. They can help you locate a qualified legal professional specialising in wills, trusts, and probate. Their online directory offers information on solicitors in your region.

• Phone: 020 7320 5650

• Website: lawsociety.org.uk

STEP (Society of Trust and Estate Practitioners)

STEP is a global organisation comprising experts in family inheritance and succession planning. Its members include solicitors, accountants, and financial advisers with specialist knowledge in trusts and estates.

• Phone: +44 (0)20 3752 3700

• Website: step.org

MoneyHelper

MoneyHelper is a government-backed service offering free guidance on pensions, insurance, and everyday financial management. Their resources include tools and advice for those looking to plan their estate effectively.

• Phone: 0800 011 3797

• Website: moneyhelper.org.uk

All references

Association of British Insurers (2021) ‘Guide to life insurance: How much cover do you need?’ London: ABI.
https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/life-insurance

Citizens Advice (2020) ‘Wills, probate and inheritance.’ London: Citizens Advice.
https://www.citizensadvice.org.uk/family/death-and-wills

GOV.UK (2018) ‘Make a will.’ London: HM Government.
https://www.gov.uk/make-will

HMRC (2019) ‘Trusts and taxes.’ London: HM Revenue & Customs.
https://www.gov.uk/trusts-taxes

HMRC (2020) ‘Inheritance Tax: Lifetime gifts.’ London: HM Revenue & Customs.
https://www.gov.uk/inheritance-tax/gifts

HMRC (2021) ‘Business Relief.’ London: HM Revenue & Customs.
https://www.gov.uk/business-relief-inheritance-tax

HMRC (2022) ‘Inheritance Tax thresholds.’ London: HM Revenue & Customs.
https://www.gov.uk/government/publications/rates-and-allowances-inheritance-tax-thresholds

Ministry of Justice (2021) ‘Probate service statistics.’ London: Ministry of Justice.
https://www.gov.uk/government/collections/probate-service-releases

MoneyHelper (2022) ‘Planning your retirement income.’ London: MoneyHelper.
https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/planning-your-retirement-income

NHS (2019) ‘Health and welfare LPAs.’ London: NHS England.
https://www.nhs.uk/conditions/social-care-and-support-guide/making-decisions-for-someone-else/lasting-power-of-attorney

National Association of Funeral Directors (2021) ‘About funeral planning.’ Birmingham: NAFD.
https://nafd.org.uk/funeral-advice/arranging-a-funeral

Ofcom (2022) ‘Online Nation report.’ London: Ofcom.
https://www.ofcom.org.uk/research-and-data/online-research/online-nation

Office for National Statistics (2023) ‘House price index data.’ London: ONS.
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex

Probate Office (2020) ‘Executor responsibilities guide.’ London: Probate Office.
https://www.gov.uk/wills-probate-inheritance

STEP (2020) ‘Key principles of estate planning.’ London: Society of Trust and Estate Practitioners.
https://www.step.org/

SunLife (2023) ‘Cost of Dying Report.’ Bristol: SunLife.
https://www.sunlife.co.uk/funeral-costs

TechUK (2021) ‘Managing digital assets after death.’ London: TechUK.
https://www.techuk.org/

The Law Society (2019) ‘Wills and inheritance quality scheme.’ London: The Law Society.
https://www.lawsociety.org.uk

The Law Society (2021) ‘Guidance on estate planning.’ London: The Law Society.
https://www.lawsociety.org.uk

Which? (2021) ‘How to make your will.’ London: Which?.
https://www.which.co.uk/money/wills-and-probate

Disclaimer

The information provided in this guide is for general informational purposes only and does not constitute professional dental advice. While the content is prepared and backed by a qualified dentist (the “Author”), neither Clearwise nor the Author shall be held liable for any errors, omissions, or outcomes arising from the use of this information. Every individual’s dental situation is unique, and readers should consult with a qualified dentist for personalised advice and treatment plans.

Furthermore, Clearwise may recommend external partners who are qualified dentists for further consultation or treatment. These recommendations are provided as a convenience, and Clearwise is not responsible for the quality, safety, or outcomes of services provided by these external partners. Engaging with any external partner is done at your own discretion and risk. Clearwise disclaims any liability related to the advice, services, or products offered by external partners, and is indemnified for any claims arising from such recommendations.