Reassured that you’ve accrued enough wealth to last your lifetime and leave a financial nest egg to your children and grandchildren, it’s all too easy to forget to make sure your beneficiaries are prepared for the financial windfall they’ll receive when you die.
Talking about money is still widely thought of as taboo. And even when money isn’t off-limits, talking about it can cause a degree of discomfort – for all those involved.
However, keeping your beneficiaries in the dark could lead them to mismanage their eventual inheritance. It may also lead them to have unrealistically high expectations of their inheritance.
Including your children in your estate planning conversations can help manage expectations
According to MoneyAge, UK adults tend to vastly overestimate the inheritance they expect to receive. Indeed, the average UK adult expects to receive more than £130,000 in inheritance – when in actual fact, figures from the Office for National Statistics (ONS) show that the median inheritance sits at approximately £50,000.
Starting your family wealth transfer early – whether simply by discussing your plans or distributing financial gifts while you’re still alive – could prove helpful to all concerned.
Where you have UK assets, lowering the value of your estate before you pass away could mean your beneficiaries avoid paying IHT on their entire inheritance – because they’ve received some of it through tax-efficient gifts already.
This may become even more important in 2027, when most UK pensions will be included in your estate when calculating Inheritance Tax (IHT).
With UK pensions to be included in Inheritance Tax calculations, planning ahead matters more than ever
The new legislation, announced in 2024 by then-chancellor Rachel Reeves, is expected to lead to 10,500 more estates becoming liable for the tax in 2027/28, and about 38,500 estates will pay more tax due to the reforms, according to HMRC estimates.
To find out more about the new IHT rules and how you might manage your estate’s IHT liability, we’ve put together a useful guide outlining what you need to know.
Download your free copy: Your guide to the new Inheritance Tax and pension rules from 2027
If you have UK assets and are concerned about how they might affect your retirement and estate plans, please get in touch.
3 simple steps to smooth your family’s wealth transfer
From easing your way into a conversation about your wishes, to giving while living and organising all the relevant documents, here are a few simple steps to help ensure a smooth transition of wealth.
1. Know your goals and set an informal “agenda”
When it comes to inheritance and your estate plan, there are multiple benefits to sharing your intentions with your family.
To make it easier and help you get a measure of what you want to share, jot down everything that’s on your mind.
With this in hand, you can devise an agenda. Even if it’s for your eyes only, it’s a helpful way to remember all the things you feel are relevant and ensure the conversation stays on course.
For example, your notes might include:
- Ensuring that everyone understands what they might expect to inherit and potential steps you could take to ensure the family wealth is passed down in the most tax-efficient way, both now and after you’re gone.
- How you wish to fund plans for later life, as well as considering the potential need to pay for care – not least because funding care costs could deplete your estate and reduce the sum your heirs will inherit.
- Details of (or your intent to set up) powers of attorney – for all your financial affairs and for healthcare, so that everyone understands your wishes.
- Whether giving while living might benefit your beneficiaries. With more of us living longer, many people are already retired by the time they inherit from their parents. In fact, figures from the UK’s Institute for Fiscal Studies suggest that, on average, people inherit between the ages of 55 and 64.
- Whether any existing wills need updating due to changing circumstances.
These are only suggestions – your family circumstances and unique dynamics will dictate what you may or may not wish to discuss.
2. Get your affairs in order
As a UK expat, if you’ve lived and worked in multiple locations, you may have assets in more than one country. Where this is the case, you’ll need to make sure you have a valid will in each jurisdiction.
Creating multiple wills may be a hassle, but it could smooth the transition of wealth by ensuring that each portion of your estate is dealt with correctly and in accordance with local laws.
Having your will (or wills) in place may also help to reduce the risk of disputes or probate delays for your beneficiaries.
While preparing to discuss your intentions, have the relevant documents close at hand for reference, ready to share all the salient details.
Items that you might wish to have ready include:
- Statements relating to your savings and investments
- Details of private and workplace pensions
- Copies of existing wills
- Bank statements.
Ideally, all of these documents should be included in an “In case of emergency” or “ICE” file.
Organising all of the key information and important documents today could provide you and your loved ones with invaluable peace of mind – just make sure your family know where to find everything when needed.
3. Invite your adult children to join meetings with your financial planner
Including your family in estate planning conversations with your financial planner could go a long way to ensuring that your wealth moves smoothly between generations.
Without careful planning and forethought, your legacy could be eroded – particularly if it will be subject to IHT in the UK.
Alexander Peter financial planners often work with multiple generations, helping to:
- Create and implement tax-efficient strategies for passing wealth
- Help you avoid costly missteps and mitigate potential IHT charges
- Mediate open and constructive financial conversations between family members.
We’re here to help make sure your great wealth transfer goes to plan
If you’d like support as you prepare to transfer your family wealth, we’re here to help.
Email enquiries@alexanderpeter.com or give us a call on +44 1733 916909.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate estate planning, Lasting Powers of Attorney, or will writing.
