Important information - investment values and income from investments can go down as well as up, so you may get back less than you invest.
With more people being drawn into inheritance tax (IHT) - thanks to high house prices, frozen IHT thresholds, and changes that will bring unused pensions and death benefits into scope for deaths on or after 6 April 2027 - you may be wondering what you can do to help your children prepare financially for when you’re no longer around.
Inheritance tax receipts reached a record £8.5 billion in the 2025/26 tax year1. And while the majority of estates don’t pay inheritance tax, frozen thresholds mean more estates could be pulled into the tax net over time. The nil-rate band is fixed at £325,000 and the residence nil-rate band at £175,000 until 5 April 20312. Even if house prices climb slowly, more people will get caught up in this fiscal drag.
On top of that, for deaths on or after 6 April 2027 most unused pension funds and pension death benefits will be included when calculating the value of an estate for IHT purposes. Exemptions and exclusions may apply, but the change could increase the number of estates with an IHT liability.
If you’re unsure as to whether this might be you in years to come, it’s worth taking action now. Although thinking about what happens after you die may feel uncomfortable, getting your financial affairs in order could give you and your family greater peace of mind.
Making a will is a vital first step. And if you then talk to your children about your plans, they’ll be much better equipped to deal with the financial side of things when the time comes.
Here are some pointers to start the conversation.
1. Who deals with Inheritance Tax?
One of the first things your children might want to know is who deals with IHT. Responsibility for administering the estate normally falls to the personal representatives. These may be the executors named in your will or, where there is no valid will, administrators appointed to deal with the estate.
IHT is normally paid from the estate before its assets are distributed. Beneficiaries will therefore usually receive a smaller inheritance rather than paying the estate’s IHT bill personally, although different rules can apply to certain lifetime gifts and trusts.
If your child is both an executor and a beneficiary, they may be responsible for administering the estate as well as receiving part of it. This is something you may want to discuss in advance.
From 6 April 2027, for deaths on or after that date, personal representatives will also generally be responsible for reporting relevant unused pension funds and pension death benefits and paying any IHT due on them. Once pension benefits vest in a beneficiary, that beneficiary may also become jointly and severally liable for the IHT attributable to those benefits. In some circumstances, personal representatives or beneficiaries may ask the pension scheme administrator to withhold funds or pay IHT directly to HMRC, which would reduce the pension benefits paid.
2. Your will and other important documents
Go through your will with them. If you’d like one or more of your children to act as executors, discuss what this means. It’s a job that requires admin and paperwork and you may feel this is too much of a burden. That’s OK, you can appoint someone else that you trust to do the job. Whatever you decide, make sure that you keep your will up to date and ensure you have key financial information collected together to make the executor’s job a bit easier. And then make sure your children know where key documents are stored.
It’s also worth considering your digital assets – such as online accounts, subscriptions and social media profiles. Make a secure record of your digital assets and leave appropriate instructions for dealing with them. Where platforms offer legacy-contact or account-management settings, consider using them. Avoid including passwords in your will, as a will may become a public document after probate.
Things change over time, so it’s worth reviewing your will after big life events to check that it still meets your needs. It will help your children to understand in advance what to expect.
Writing up your will doesn’t need to cost the earth. In fact, every year ‘Free Wills Month’ gives people aged 55 and over the chance to have a simple will written or updated free of charge by participating solicitors in selected locations across the UK. The initiative is supported by a group of well-known charities.
3. Don’t forget your pension
At the moment, most unused pension funds are not included in your estate for IHT purposes. For deaths on or after 6 April 2027, however, most unused pension funds and pension death benefits will be included when calculating the value of your estate.
Exemptions may apply - for example, where benefits pass to a spouse or civil partner - and some benefits will remain outside the rules. Your personal representatives will generally be responsible for reporting the relevant pension benefits and paying any IHT due.
And while I’m on the topic of pensions, make sure your expression of wish form for your pension is up to date too (this is where you can nominate your beneficiaries).
The quickest way to nominate your beneficiaries with your workplace pension is in PlanViewer.
- Open the PlanViewer App.
- Go to the ‘Profile’ icon in the bottom right-hand corner.
- Click on ‘My beneficiaries’.
- Tap the ‘get started’ button and fill out the form.
It really is that straightforward!
If you’ve not registered for PlanViewer yet, you can learn how to do that below.
4. Think about what you can gift in advance
There are several exemptions and allowances that may help reduce the eventual IHT liability. From the seven-year rule for gifts, to paying for a wedding and regular gifting from your income - there are ways to pass on your wealth while you’re still around to see your children enjoy your generosity. It’s worth having a conversation with your children to find out what their own financial needs might look like in the future.
| Gift | Amount | The detail |
|---|---|---|
| The seven-year rule for gifts | N/A | You can generally give an individual any amount without an immediate IHT charge. If you survive for seven years after making the gift, it will normally fall outside your estate for IHT. If you die within seven years, it may use some or all of your nil-rate band. Taper relief may reduce the tax due on chargeable gifts made between three and seven years before death. |
| Annual exemption | £3,000 per year | You can give away £3,000 per tax year (assets or cash), divided between one or more people, without IHT applying at all. You can carry forward any unused annual exemption from the previous tax year, but you must use the current year’s exemption first. |
| Small gifts | £250 per person per year | You can give up to £250 to as many people as you like in a tax year, provided you have not used another gift allowance for the same person. |
| To help pay for a wedding | £1,000 to £5,000 | You can make an exempt gift for a wedding or civil partnership ceremony, provided it is made on or shortly before the ceremony and the ceremony takes place. You can give £1,000 to anyone you know; £2,500 to a grandchild or great-grandchild and £5,000 to a child. |
| To financially support a child | N/A | Reasonable payments towards the maintenance of your child may be exempt where the child is under 18 or in full-time education. Other maintenance exemptions can apply, including payments for a spouse, former spouse or dependent relative, so professional advice may be helpful. |
| Regular gifts from income | N/A | Regular gifts may be exempt where they form part of your normal expenditure, are made from income rather than capital, and leave you with enough income to maintain your usual standard of living. |
It’s worth keeping a record of any gifts, as they may be called into question at a later date. Always be aware that tax rules change, so please double-check what you can and can’t do.
5. Think about getting extra support if you need it
IHT is complex and nuanced. If you’re at all unsure, think about seeking help from a specialist - whether that’s a regulated financial adviser, solicitor or qualified tax professional.
You can also find lots of useful information on the government website
Sources:
Important information: This is for information purposes only and the views contained are not to be taken as advice or a recommendation for any product, service or course of action. The value of investments can go down as well as up, so you may get back less than you invest. You cannot normally access your pension savings until age 55. This is due to rise to 57 in 2028. Tax treatment depends on individual circumstances and all tax and pension rules may change in the future.
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