Estate Planning & Inheritance tax
You have spent a lifetime building wealth. Property, pensions, investments, perhaps a business. At some point, all of it will either pass to the people you care about or a significant portion of it will go to HMRC. Which of those outcomes prevails depends almost entirely on whether you plan for it.
Estate planning is not something most people want to think about. It involves confronting questions about mortality, family dynamics, and control that are easier to defer than to face. But the cost of deferring is real. Families pay inheritance tax they did not need to. Wealth passes to the wrong people, or in the wrong way. And in the worst cases, the absence of basic documents like a Lasting Power of Attorney can leave your family unable to act when they need to most.
This is not about complicated schemes or aggressive tax avoidance. It is about making sure your wishes are clear, your family is protected, and your wealth passes on as efficiently as the law allows. BSG Financial Solutions works with clients to build estate plans that do exactly that, coordinating across your financial adviser, solicitor, and accountant so nothing falls between the gaps.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Inheritance Tax: What You Need to Know
Inheritance tax is charged at 40% on the value of your estate above the nil-rate band. For most people, that threshold is £325,000, or £500,000 if your estate includes a residence passed to direct descendants. Married couples and civil partners can combine their allowances, giving a potential threshold of £1 million before any tax is due.
That sounds generous until you add up what your estate actually includes. Your home, your savings, your investments, your pensions (from April 2027), life insurance not written in trust, and any business assets. For many of our clients, the estate exceeds these thresholds comfortably, and without planning, their families face a bill that could have been significantly reduced.
What Can Be Done About It?
There is no single solution. Effective IHT planning uses a combination of approaches depending on your circumstances, your family, and how much control you want to retain during your lifetime.
Gifting is the most straightforward route. Gifts made more than seven years before death fall outside your estate entirely. Annual exemptions, gifts out of surplus income, and gifts on marriage all offer further opportunities. But gifting only works if you can afford it, and working out what you can give away without compromising your own financial security is where proper planning makes the difference.
Trusts allow you to move assets out of your estate while retaining a degree of control over how and when they are distributed. Discretionary trusts, bare trusts, and family investment companies each serve different purposes. They are powerful tools but come with their own tax rules and ongoing administration, so they need to be set up properly and reviewed regularly.
Life insurance written in trust will not reduce your IHT liability, but it can give your family the cash to pay the bill without having to sell assets under pressure. This is particularly relevant where the estate is asset-rich but cash-poor - a common situation for property owners and business owners.
Trusts and Family Investment Companies
Trusts are one of the most powerful tools in estate planning and for clients with significant wealth they are often essential rather than optional.
The reasons people use trusts go well beyond reducing an inheritance tax bill. A discretionary trust lets you pass wealth to the next generation while retaining control over when and how they access it — useful when children are young, financially inexperienced, or in relationships you are not certain will last. Assets held in trust can be protected from divorce settlements, bankruptcy, and creditor claims in ways that outright gifts cannot.
Family investment companies serve a similar purpose for larger estates, allowing you to transfer value while keeping control of investment decisions and the timing of distributions. They are increasingly common for families with wealth they want to manage across generations rather than simply hand over. The structure lets parents retain voting control while gifting economic value to the next generation, and unlike most trusts, there are no 10-year periodic charges.
Trusts also play a practical role in managing how your estate is administered. A well-structured trust can reduce delays, avoid disputes between beneficiaries, and give your trustees the flexibility to respond to circumstances you cannot predict today.
The complexity is real. Trusts and FICs have their own tax rules, reporting requirements, and ongoing administration. Getting them wrong can create problems rather than solve them. We work with your solicitor to make sure any structure fits your wider financial plan and is reviewed regularly as your circumstances and the rules change.
Trusts are not regulated by the Financial Conduct Authority.
Pensions and Estate Planning
Pensions have historically sat outside your estate for IHT purposes, making them one of the most effective tools for passing wealth to the next generation. That is changing. From April 2027, unused pension funds will be included in your taxable estate.
This is a significant shift for anyone who has been deliberately preserving their pension as a legacy asset. If that is part of your strategy, it needs revisiting. The interaction between pension death benefits, your other assets, and the new IHT rules creates planning opportunities but only if you act before the changes take effect
Lasting Power of Attorney (LPA)
This is the document most people overlook, and the one that matters most when things go wrong.
Without an LPA, if you lose mental capacity your bank accounts can be frozen, you cease to qualify as a company director, and your family cannot make financial decisions on your behalf. They would need to apply to the Court of Protection for a deputyship, which takes months, costs thousands, and leaves everything in limbo.
An LPA takes a few weeks to set up. We raise it with every client, and it is one of the first things we check.
Lasting Power of Attorney are not regulated by the Financial Conduct Authority.
Business Property Relief
If you own a qualifying trading business, Business Property Relief can reduce the value of those assets for IHT purposes. Historically, this relief has been uncapped at 100%, effectively removing qualifying business assets from your taxable estate entirely.
From April 2026, the rules are changing. Full 100% relief will be capped at £2.5 million of combined qualifying business and agricultural property. Above that threshold, relief drops to 50%, meaning an effective IHT rate of 20% on the excess. The allowance is transferable between spouses and civil partners, so a couple could potentially pass on up to £5 million of qualifying assets at the full relief rate.
For business owners whose companies are worth more than £2.5 million, or who hold a mix of business and agricultural assets, this is a significant shift that requires reviewing your estate plan now rather than waiting for the change to take effect. We work with a number of business owners for whom this change materially affects their planning. If that includes you, the sooner you review your position the more options you have.
Wills
A will needs to do more than name who gets what. For those with blended families, business interests, or assets held across different structures, it needs to work alongside your shareholder agreements, trust arrangements, pension nominations, and any other structures already in place. Getting this coordination wrong can undo years of careful planning.
We do not draft wills, your solicitor. However we work with them to make sure yours reflects the full financial picture, not just a snapshot of one part of it.
Will Writing is not regulated by the Financial Conduct Authority.
How BSG Helps with Estate Planning
Most people know their estate planning has not kept pace with their wealth. What made sense five or ten years ago no longer reflects where you are. Assets have grown, structures have changed, trusts may have been set up but never reviewed, and the tax landscape has shifted. There is a sense that more could be done to protect what you have built, but no one is looking across all of it and telling you where the gaps are.
That is what we do. We review the full picture, identify what is outdated or misaligned, and build a plan that connects your estate, your finances, and your legal structures into something coherent. We work alongside your solicitor and accountant because this is not something any one adviser can do in isolation. It requires coordination across disciplines, and that is where our experience with clients in complex situations makes the difference.
The result is clarity. You know your wealth will pass to the right people, in the right way, at the lowest reasonable cost. And you know that someone is keeping it current as your life and the rules continue to change.
Start a Conversation
Estate planning is easier to put off than almost any other financial decision. But the earlier you address it, the more options you have and the less it costs, in every sense. If you want to understand where you stand or review arrangements you put in place years ago, we are happy to talk.
There is no obligation and no cost for an initial discussion.
FAQs
Q: What is the current inheritance tax threshold in the UK?
A: The nil-rate band is £325,000 per person. If your estate includes a home passed to direct descendants, an additional residence nil-rate band of £175,000 applies, giving a total threshold of £500,000. Married couples and civil partners can transfer unused allowances to each other, meaning a couple can potentially pass on up to £1 million before inheritance tax is due. Anything above your available thresholds is taxed at 40%. These thresholds have been frozen since 2009 and are not due to increase until at least April 2030
Q: How much inheritance tax will my family pay?
A: That depends on more than just the value of your estate. The type of assets you hold, how they are owned, what reliefs and exemptions apply, and whether you have made gifts in the preceding seven years all affect the final figure. Two estates of the same value can produce very different tax bills depending on how they are structured. We can review your position and give you a clear picture of your likely exposure, and what could be done to reduce it.
Q: What is the difference between a will and a trust?
A: A will sets out what happens to your assets when you die. A trust allows you to transfer assets during your lifetime or on death, with conditions attached to how and when they are distributed. Trusts can reduce inheritance tax, protect assets, and give you more control over how your wealth is passed on, but they come with their own rules and require professional advice to set up properly.
Q: How can a trust protect my wealth?
A: A trust moves assets out of your personal estate and into a structure governed by rules you set. That means the wealth can be protected from divorce settlements, bankruptcy, and creditor claims in ways that outright gifts cannot. A discretionary trust also lets you control when beneficiaries receive money and how much, which is valuable when children are young or financially inexperienced. It is not just about tax. For many families, the protection and control a trust provides is the primary reason for setting one up.
Q: What is a family investment company and how does it work?
A: A family investment company is a private limited company used to hold and manage family wealth. The parents typically retain voting shares, which gives them control over investment decisions and distributions, while gifting non-voting shares to children or grandchildren. This transfers economic value out of the parents' estate for inheritance tax purposes while keeping control firmly with the founders. Unlike most trusts, a family investment company is not subject to 10-year periodic charges, which makes it attractive for larger estates. It requires careful structuring and ongoing management, so professional advice is essential.
Q: Do I need a Lasting Power of Attorney?
A: Yes. Without one, if you lose mental capacity your family cannot access your bank accounts, manage your investments, or make financial decisions on your behalf. They would need to apply to the Court of Protection, which is slow and expensive. An LPA is straightforward to set up and is one of the most important documents anyone with assets or a business should have in place. It is not a legal requirement but we always highly advise our clients set them up.
Q: What is Business Property Relief?
A: Business Property Relief reduces the value of qualifying business assets for inheritance tax purposes. Currently, qualifying trading businesses can attract uncapped 100% relief. From April 2026, full relief will be capped at £2.5 million of combined business and agricultural property, with 50% relief above that. The allowance is transferable between spouses. If you own a business worth more than £2.5 million, this change could significantly affect your estate planning.
Q: Will my pension be subject to inheritance tax?
A: Currently, pensions generally sit outside your estate for IHT purposes. From April 2027, unused pension funds will be included in your taxable estate. If preserving your pension as a legacy asset has been part of your planning, this change means your strategy needs reviewing.
Q: Can BSG help with estate planning for business owners?
A: Yes. Business owners face specific estate planning challenges, Business Property Relief changes, shareholder protection, succession planning, and the interaction between business assets and personal wealth. We work with a significant number of business owners and coordinate with their solicitors and accountants to make sure everything is aligned.