Manage your estate in a tax efficient way

Manage your estate in a tax efficient way
  • Financial planning
  • 3 minute read

People often end up paying Inheritance Tax (IHT) on their estate because they haven’t put their finances in order. Estate planning is a great way to ensure all of your assets are considered, be it your money, property, contents of your home or your pension. It allows you to decide what you want to leave and to whom.

We have listed a few helpful steps for you to consider when looking at estate planning strategies.

What is the value of my estate?

The first step is to create a list of all the assets you own. The list should include the specific item, an estimate of its value and the whereabouts of any documents relating to it. The types of assets that you should consider to include are:

  • Property you own (or part-own) including your main residence, any holiday homes, buy-to-let properties and shares in inherited properties to name a few examples
  • Bank, building society and other savings accounts
  • Jewellery and personal effects
  • Art and other such valuables
  • Vehicles
  • Life insurance lump sums payable after your death
  • Stocks, shares, unit trusts, cash and any other investments

Consider your debts

As well as taking into account your assets, you will also need to consider your debts. These may include the following:

  • Mortgages
  • Loans and overdrafts
  • Outstanding credit cards
  • General household bills including utilities, insurance and council tax
  • Estimated funeral costs
  • Estimated solicitor’s fees

Once you have both of these listed, the value of your estate is your total assets less your total liabilities. It is worth reassessing the value over time, as the value of your assets can and will change.

Are you liable for IHT?

When you pass away, your estate could be subject to IHT if it’s worth more than the IHT threshold. This is currently set at £325,000 for a single person and £650,000 for a married couple or civil partners.

Introduced in 2017, the family home allowance increases the threshold by £175,000, or the value of your family home if this is less than £175,000. This brings up the total threshold to £500,000 per person, meaning that married couples and civil partners are able to pass assets that include a family home of up to £1m to direct descendants.

Many people think that their estate is not big enough to incur IHT. However, it is worth valuing your entire estate to prepare for any IHT implications.

IHT planning

There are a number of IHT planning opportunities that can help you to reduce the likelihood of paying IHT, these include:

  • Gifts made to charities, museums and universities, you can find more details on the HMRC website¹
  • You can gift any amount to anyone and if you live for seven years after that, it will be fully exempt from IHT, unless the gift is over £325,000. Taper relief then applies if the total gift made in the seven years before you pass is over the £325,000 tax-free threshold
  • If you continue to benefit from something you’ve given away, it might not be exempt from IHT and is called a ‘gift with reservation of benefit’

To find out more or if you have any questions about estate planning, don’t hesitate to contact us by clicking the button below.

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Please note that any tax benefits will depend on your personal tax position and rules are subject to change. Rules can vary between different regions of the UK and we recommend speaking to a tax specialist for your regional rules.The value of investments can go down as well as up, and you may get back less than you invested.



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