As Wealth Managers and not solely Investment Managers, our conversations with clients frequently extend into Estate Planning. This can range from conversations about lifetime gifts and structuring to mitigate future Estate taxes, to ensuring that clients have appropriately drafted Wills so that their assets pass as per their wishes and in the most tax efficient and straightforward way.
Whilst the concept of an Estate Plan can seem very grand, it does not need to be overly complicated. It is however, important that an Estate Plan is tailored to the individual and their specific circumstances and objectives.
At a base level, all clients should hold an appropriately drafted Will to avoid the possibility of dying intestate. This is a scenario to be avoided, as it is rarely the case that the rules of intestacy, which are specific to each country, necessarily mirror what the wishes of the deceased would have been.
In the UK, it is common for parents to make a lifetime gift to a child, for example to help with a property purchase. This can also help reduce the parents’ future exposure to UK Inheritance Tax.
If the child were to predecease the parent without a Will, spouse, civil partner or child, the UK intestacy rules could mean that the assets pass back to the parents automatically.
This could undo the original intention of passing wealth to the next generation. A simple Will could instead have redirected those assets to another chosen beneficiary, such as a sibling.
Once an Estate Plan has been drafted, good practice is for it to be reviewed periodically. This is to ensure that it both continues to meet the wishes of the individual and takes account of any changes in the tax landscape.
In an increasingly global world, our clients often hold assets in multiple jurisdictions and therefore it is important to understand whether a Will drafted in one jurisdiction can cover worldwide assets or whether it is more appropriate for an individual to hold multiple Wills or to hold assets within a structure. In this instance co-ordination is key, as is understanding the local rules in the country where the asset is located, as both the rules and process may be different from your home jurisdiction.
For example; an individual who dies owning a property in France may find that not only is their Estate subject to inheritance tax in France, but the French succession laws may also apply.
In my experience, it pays to complete a walk-through of an Estate Plan so that you can understand the practical implications. For example, it may not be either possible or desirable for certain beneficiaries to receive a particular asset due to constraints driven by either tax or regulation. Equally, what would happen to illiquid assets and/or assets held in foreign jurisdictions? In these scenarios, consideration in advance of death may mean that steps can be taken to either avoid future complications or to make sure that where this is not possible there is clarity for the executors on the steps they need to take and the advice required.
For example; If a UK domiciled individual with only a UK Will, were to die whilst holding the bulk of their assets in the US there will likely be a delay with the Estate being able to access the US funds. This is because the US Financial Institution will only release funds following a US Grant of Probate which in this scenario can only be applied for once the UK Grant of Probate has been received. Not only can the delay lead to problems for the beneficiaries, but it can lead to the Estate being unable to pay any UK Inheritance Tax due within the 6-month deadline from the end of the month in which the individual died. Unfortunately, failure to meet this deadline will result in an interest penalty which is currently charged at 7.75% p.a.1 The impact can therefore be very costly, especially when compared to the cost of having a US Will in place.
Whilst in the US the Gift and Estate Tax exemption is currently $15,000,0002 per individual, in the UK the allowance is far smaller at £325,000 (Roughly $438 ,000 at the current exchange rate).3 This inevitably means that our UK based clients, assuming they are long-term resident in the UK, and/or those clients holding UK situs assets, are far more likely to have a liability to Inheritance Tax following their demise.
Furthermore, the changes that came into effect from April 2025 have ruled out some of the opportunities that were previously available to non-Domiciled individuals, resident in the UK, to mitigate their exposure to UK IHT. This has made early planning even more important to take advantage of the limited opportunities to use structures to conserve your wealth.
Clearly one of the easiest ways to mitigate any Estate Tax is to spend the funds in your lifetime, but this is not always possible nor desirable for obvious reasons.
Another option is lifetime gifting. For UK residents, gifts may qualify as potentially exempt transfers, meaning that if the donor survives for more than seven years after making the gift, the value is excluded from their estate for Inheritance Tax purposes.4 In this scenario, we can work with clients to complete a lifetime cashflow modelling exercise to give them greater context of the extent to which they can make gifts without compromising their ability to meet their other goals and objectives.
For those individuals who are either unwilling or unable to make gifts, another option is to look at the option of insuring against the future liability. Whilst this does not avoid the liability, the intention is for a life insurance policy to pay out a sum assured that is equal to the liability, thus allowing the beneficiaries to receive the full amount. Clearly, insuring against an inevitability can be expensive, but in the right scenario, especially when looking to cover a limited period, this can be both a straightforward and cost-effective solution.
Ultimately, just as an Estate Plan needs to be tailored to the individual’s circumstances and objectives, so too has the solution used when trying to manage exposure to multiple Estate Taxes. Working alongside tax and legal specialists we are well placed to assist.
To find out more about how we can help you with estate planning please contact your wealth manager or contact us.
[1] HMRC interest rates for late and early payments - GOV.UK
[3] Source: Factset GBP/USD 1.3480 (16/07/26).
[4] How Inheritance Tax works: thresholds, rules and allowances: Rules on giving gifts - GOV.UK
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