Estate Planning Explained: Wills, Inheritance Tax, Pensions and Financial Planning
Estate planning is something many people put off because it can feel complicated, expensive or like something they only need to think about later in life.
But good estate planning is really about one simple question:
What do you want your wealth and assets to do, both during your lifetime and after you die?
In the latest episode of the 1020 Networking Podcast, Paul Hill is joined by Jenny Walker from Cognitive Law and George Rashbrook from Sterling and Law to discuss estate planning, wills, lasting powers of attorney, inheritance tax, pensions and financial planning.
The conversation looks at why legal and financial advice often need to work together, particularly as inheritance tax rules continue to change.
What is estate planning?
Estate planning is about making decisions about what happens to your assets and finances.
That could mean deciding who receives your estate when you die, putting a will in place, creating trusts or considering inheritance tax.
But it is not only about what happens after death.
As Jenny explains, estate planning can also include putting a lasting power of attorney in place. This allows you to appoint people you trust to make decisions about your financial affairs and health and welfare if you lose the capacity to make those decisions yourself.
A properly prepared will can also make your wishes clear and provide an opportunity to consider how your estate should be structured.
Why wills are only part of the picture
Writing a will is important, but the discussion highlights why estate planning should not necessarily stop there.
Jenny’s experience administering estates means she can look beyond the wording of a will and consider how arrangements may actually work when someone dies.
That can include looking at inheritance tax, how assets are protected and how arrangements could affect the wider family.
There can also be practical considerations that someone writing their own will may not think about.
This is where having the right professional advice can make a difference.
Inheritance tax is becoming an increasingly important consideration
Inheritance tax is one of the main themes of the conversation.
George explains that the basic inheritance tax threshold has remained at £325,000 since 2009, while property, investments and other assets have increased in value.
That means more people can potentially find themselves dealing with inheritance tax as the value of their estates increases.
The discussion also covers planned changes involving pensions from April 2027.
As explained during the podcast, pensions that currently sit outside the estate for inheritance tax purposes are due to be brought into the calculation under the changes discussed.
That could mean more people need to consider how their pension savings fit into their wider estate planning.
The important point is that the rules are complex, and the speakers stress that people should take professional advice rather than making major financial decisions based on general information.
Could your family be paying more inheritance tax than necessary?
One of the most striking examples discussed in the episode involves an estate where a significant inheritance tax relief had not been claimed.
Jenny explains that identifying the available relief saved the estate around £140,000 in inheritance tax.
The point is not that everyone can make the same saving.
It is that there can be allowances and reliefs that people are unaware of, and simply completing an inheritance tax form does not necessarily mean someone has identified every relief they may be entitled to.
Professional advice can therefore be particularly important when dealing with more complicated estates.
Why legal and financial advice can work together
Estate planning can sit across several different areas.
A solicitor may deal with wills, lasting powers of attorney, trusts and other legal arrangements.
An independent financial adviser can look at pensions, investments, financial planning and potential inheritance tax strategies.
The podcast highlights the value of these professionals working together.
One person may identify an issue from a legal perspective, while the other may be better placed to consider the financial products or planning strategies that could address it.
That joined-up approach can help create a more complete picture.
What does the internet get wrong about estate planning?
The internet has made information about wills, pensions, investments and inheritance tax much easier to access.
But information is not the same as advice.
As Jenny points out, you need to understand what you are reading and, more importantly, understand how it applies to your own circumstances.
Two people can read exactly the same information online and require completely different advice.
The rules can also change.
That makes relying on old articles, social media posts or generic online advice particularly risky when making significant decisions about your estate.
Inheritance tax and pensions
The proposed changes to pensions are one of the key topics discussed in the episode.
George explains that someone may currently have an estate below the level where inheritance tax becomes an immediate concern, but their pension savings could change the position under the planned rules.
The conversation also touches on the interaction between the available allowances and larger estates.
This is an area where individual circumstances matter.
The size of someone’s pension, property, investments and other assets can all affect the overall picture.
And because the legislation discussed in the podcast was still subject to change, the speakers emphasise the importance of getting current professional advice.
What can you actually do about inheritance tax?
There is no single solution that works for everyone.
George outlines several strategies that may be considered depending on an individual’s circumstances.
These include:
- Paying the inheritance tax when it becomes due
- Using life insurance to help cover a potential tax bill
- Considering certain investments that may receive different inheritance tax treatment
- Looking at trust planning
- Giving assets away in certain circumstances
- Reviewing how wealth is intended to be used during a person’s lifetime
But each option comes with potential consequences.
Some investments carry more risk or higher charges.
Some trust arrangements can mean you no longer have access to the capital.
And paying less tax is not necessarily the only objective.
Don’t let the tax tail wag the dog
One of the strongest points from Jenny is that tax should not be the only consideration when planning an estate.
The aim should be to work out what you actually want your wealth to achieve.
That could mean supporting your children, helping future generations, enjoying your money during your lifetime or leaving something behind for others.
If a strategy saves tax but leaves you unable to use your money in the way you want, it may not be the right strategy.
Estate planning is therefore about more than minimising a tax bill.
It is about finding an approach that works for you and your family.
Where should you start with estate planning?
The advice from both professionals is fairly straightforward.
Start by understanding what you have.
That means looking at your property, pensions, investments and other assets.
Then consider what you want those assets to do during your lifetime and what you want to happen afterwards.
From there, it may be appropriate to speak to both a legal professional and an independent financial adviser.
You may also need to review your plans as circumstances and legislation change.
There is no crystal ball, as Jenny puts it.
But having a plan is better than leaving important decisions until somebody else has to make them.
Estate planning is about more than inheritance tax
The biggest takeaway from this 1020 Networking Podcast discussion is that estate planning is not simply about avoiding inheritance tax.
It is about making sure the right things go to the right people at the right time.
That might mean putting a will in place.
It might mean arranging a lasting power of attorney.
It might mean reviewing your pension or investments.
Or it might simply mean understanding what your family could face when you are no longer around.
The earlier you understand your position, the more options you may have.
Need help with your estate planning?
If you are unsure whether your will, pension, investments or wider estate planning arrangements are working together properly, it is worth speaking to the appropriate professional.
For legal advice around wills, lasting powers of attorney, trusts and estate planning, contact Jenny Walker at Cognitive Law.
For independent financial advice around pensions, investments and financial planning, contact George Rashbrook at Sterling and Law.
Visit the 1020 Networking members page and use the relevant contact details to get in touch with them directly.
This article is based on the discussion in the 1020 Networking Podcast and is intended for general information only. It is not legal or financial advice. Your circumstances should be considered individually by an appropriately qualified professional.