Protecting your wealth for the next generation

Most people spend a lifetime building their wealth, whether through a successful career, growing a business, investing wisely, or inheriting family assets. Naturally, they want as much of that wealth as possible to pass to their loved ones rather than paying more tax than may be necessary under the rules at the time.

The good news is that with forward planning and the right professional advice, there are a number of legitimate planning options that may help reduce a future Inheritance Tax (IHT) liability and support your family’s longer-term financial planning.

1. Make a will – the foundation of estate planning

A professionally drafted Will is one of the most important steps you can take.

It ensures your assets are distributed according to your wishes and can help avoid unnecessary stress, delays and complications for your family at what is already a difficult time.

Without a valid Will, your estate will be administered under the rules of intestacy, which may mean your assets do not pass to the people you intended or in the proportions you would have chosen.

Quite simply, a Will gives you control and provides peace of mind for those you leave behind.

Wills should also be reviewed regularly, particularly after major life events such as marriage, divorce, bereavement, the birth of children or grandchildren, or significant changes in wealth.

2. Take advantage of gift allowances

HMRC allows individuals to make certain gifts during their lifetime that are immediately exempt from Inheritance Tax.

As at July 2026, you can give away up to £3,000 each tax year, known as the annual exemption. If unused, this allowance can usually be carried forward for one tax year. Parents, grandparents and other family members can also make tax-efficient gifts for weddings and civil partnerships, while smaller gifts of up to £250 per person can be made to multiple recipients each year.

Regular gifting can be a useful way to gradually reduce the value of an estate while helping children, grandchildren and other loved ones during your lifetime.

3. Help family members while you’re here to see it

Many parents and grandparents choose to provide financial support to younger generations, whether that is helping with a property deposit, education costs or other significant life events.

Larger gifts to individuals may fall outside your estate for Inheritance Tax purposes if you survive for seven years after making them. This can be a useful way of passing wealth to the next generation while seeing the difference it makes to their lives.

For many families, there is great satisfaction in being able to provide support when it is needed most, rather than simply passing assets on later through an estate.

4. Consider using trusts

Trusts can be a valuable estate planning solution for families who wish to pass on wealth while maintaining a degree of control over how it is eventually distributed.

In some circumstances, assets placed into trust may reduce the value of your estate for IHT purposes, but trusts are complex and can have their own tax consequences.

Trusts may also help protect family wealth for children and grandchildren and provide reassurance that assets are managed in line with your wishes.

Because trust planning can be complex, professional advice is essential to ensure the most appropriate solution is chosen.

5. Make regular gifts from surplus income

One of the most overlooked Inheritance Tax planning opportunities is the ‘normal expenditure out of income’ exemption.

In simple terms, if you have income that you do not need to maintain your lifestyle, you may be able to make regular gifts from that surplus income without creating an Inheritance Tax liability.

For example, regular contributions towards a grandchild’s education, savings plan or investment account could potentially fall outside your estate immediately, provided certain conditions are met.

This can be particularly valuable for retirees with strong pension income or individuals with surplus earnings.

Keeping clear records of income, expenditure and gifts is important, as executors may need to demonstrate that the exemption applies.

6. Plan ahead for any future tax bill

Sometimes it is neither practical nor desirable to give away substantial assets during your lifetime.

In these situations, it may be sensible to plan how any future Inheritance Tax liability will be funded.

One commonly used solution is a life assurance policy written in trust. The proceeds can be paid directly to beneficiaries or trustees and used to meet any Inheritance Tax liability when it arises, helping to avoid delays, borrowing costs or the forced sale of valuable family assets.

This approach can provide reassurance that loved ones will have access to funds when they need them most.

However, this will not reduce the IHT liability itself, and suitability will depend on factors such as affordability, health, age and underwriting.

7. Leaving a well-planned legacy

Effective estate planning is not just about reducing tax. It is about ensuring your wishes are respected, your family is protected, and the wealth you have worked hard to create benefits the people who matter most.

By taking action early and seeking professional advice, you can create a tailored plan that helps preserve your estate, supports future generations and gives you confidence that your legacy will be passed on as intended.