Estate planning: What to consider and what’s involved

This article explains what estate planning is and the various strategies that may be considered in order to minimise the impact of IHT

Estate planning means putting a plan in place for how your assets will be distributed after death.

There are many parts to estate planning, but for many people a key consideration will be mitigating inheritance tax (IHT). A decade of UK house price growth has meant more families are coming above the threshold for inheritance tax, so IHT is being charged to more households.

Below we explain what estate planning is and what’s involved.

What is estate planning?

Estate planning involves planning how assets such as property, money and possessions will be distributed after your death. You will likely consult a solicitor and financial adviser for help with estate planning at some point in your lifetime.

It is important for anyone to think about estate planning. But having a plan in place is particularly important for homeowners and for those with a large amount of assets.

Currently, inheritance tax of 40% is charged on estates worth more than £325,000. But if you leave the family home to a direct descendant, the allowance rises to £500,000. Couples who are married or in a civil partnership each get an allowance, so the total amount that can be passed on to children or grandchildren free of IHT doubles to £1m.

These tax reliefs form an essential part of estate planning. On top of this, a financial adviser or financial planner may look at other ways to reduce the value of an estate to reduce IHT.

Below we look at the different strands to estate planning.

Writing a will

Drawing up a will is essential for outlining how you want your estate to be distributed to others. You may want to consider leaving money to good causes in charities in addition to your family and loved ones.

A will sets out your wishes clearly and should help avoid disputes. A will may also include preferences on funeral arrangements and details about potential guardians for any children.

You will name an executor or executors, who are responsible for carrying out the instructions and wishes specified in the will.

Power of attorney

A lasting power of attorney (LPA) is a legal document where you appoint one or more people to make decisions on your behalf. This is important in case you have an accident or illness that means you cannot make decisions on your own.

An LPA is a separate document to a will, but people may choose to get them done at the same time. It costs £82 to register an LPA.

Inheritance tax

Many people wish to minimise any potential inheritance tax (IHT) bill for their loved ones. IHT is paid from your estate, before your money and assets are distributed to your beneficiaries.

To reduce any potential IHT bill, financial planners may suggest the below.

Gifting money or assets

There is nothing to stop you giving away money or assets to loved ones during your lifetime. Perhaps you are helping a grandchild get on the property ladder or are paying for home renovations for another family member.

You are allowed to give away up to £3,000 a year without worrying about IHT. You can either pay this £3,000 to one person or split it between several people.

But be aware IHT may later be charged on amounts above this if you die within seven years of making the gift, and your estate is above the IHT threshold.

Giving away money from income

You can make regular payments out of surplus income that will not be liable for future IHT. This money must be paid out on a regular basis, perhaps through a standing order, and your own standard of living should be unaffected by giving away this money.

The government has strict rules on what qualifies as income, so it is always worth checking with a specialist - perhaps a financial adviser or a solicitor - about what qualifies.

Life insurance

A payout from a life insurance policy can cover any IHT bill without the executor having to worry about selling assets to pay the bill.

If your life insurance policy is put into a trust, no IHT will be charged on the life insurance payout. This is because the money will be paid directly to your beneficiaries, and will not form part of your estate.


Money saved into a defined contribution or private pension should fall outside your estate, and is therefore free of inheritance tax.

Pensions can be a very tax-efficient way of passing on money. If you die before the age of 75, your beneficiaries will not pay any tax. If you die after 75, those inheriting the pension may have to pay income tax on the withdrawals.

It is important you tell your pension provider who you would like to inherit any pension savings after your death.

Business relief

Money invested in companies that qualify for business relief (BR) may be free from inheritance tax.

To qualify for IHT relief, the investment must have been held for a minimum of two years and be invested in a company that qualifies for business relief.

Business relief is a tax relief that is becoming increasingly popular in estate planning. This is because business relief offers faster IHT exemption than giving money away, which may only become free from IHT after seven years.

How the ProVen Estate Planning Service can help

Estate planning is a wealth management process that should be considered by anyone who has wealth and property to pass on.

The ProVen Estate Planning Service (PEPS) invests in companies likely to qualify for business relief. Financial advisers may recommend a client invests in our service to access business relief.

As well as offering access to business relief, the aim of PEPS is to offer investors capital growth and dividend income. We are proud to have a long track record of offering consistent annual returns of 4-5 per cent, while at the same time boosting the value of the capital sum invested.

We focus on companies with a long track record of being in business to minimise risk and maximise the chance of reliable returns.

Find out more about the ProVen Estate Planning Service here.

This article is for UK residents interested in finding out more about Business Relief and the ProVen Estate Planning Service strategies. UK tax rules and regulations are subject to change, and such changes may be retrospective. Your ability to obtain tax reliefs will depend on your personal circumstances. It is not our intention to offer legal, tax or investment advice, and we always recommend that investors seek professional advice that can take account of their personal circumstances before making any investment or estate planning decisions. An investment in the ProVen Estate Planning Service should be considered high risk and past performance is not a good indicator of future results.

Important notice: issued by Beringea LLP of Charter House, 55 Drury Lane, London, England WC2B 5SQ, registered in England & Wales number OC342919 and authorised and regulated by the Financial Conduct Authority, number 496358.


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020 7845 7820 | info@beringea.co.uk

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