Passing on wealth to future generations is one of the most meaningful ways to use your hard-earned money. It could help your children or grandchildren buy a home, pay for education, or even start a business. That’s why minimising the impact of Inheritance Tax (IHT) is a key part of estate planning, ensuring more of your wealth goes to your loved ones.

Inheritance Tax used to be something that only affected the very wealthy, but that’s no longer the case. Up to 40% of your estate could be taxed, depending on the value of your assets.

However, there are allowances that help reduce this liability:

• Nil Rate Band (NRB): Currently set at £325,000. Unused allowance can be transferred to a spouse or civil partner, doubling it to £650,000.
• Residence Nil Rate Band (RNRB): If you leave your main home to your direct descendants, you could qualify for an extra £175,000 allowance per person.

When deciding who should inherit your wealth, it’s important to think carefully. Some loved ones may not be in the best position to manage a large sum of money, perhaps due to divorce, bankruptcy, or simply being too young to make informed financial decisions. A trust can be a valuable way to protect your assets and ensure they’re managed responsibly.

Three Steps to Protect Your Wealth

1. Get your Will and financial affairs in order to ensure a tax-efficient transfer of your assets.
2. Consider lifetime gifts to gradually pass on wealth while taking advantage of tax exemptions.
3. Create a tax-efficient fund to provide a legacy or help cover any IHT due.

Building your wealth takes hard work, smart decisions, and sometimes a bit of luck. Protecting it for the next generation takes careful planning and expert advice.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances. 

Advice relating to a Will involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills and Trusts are not regulated by the Financial Conduct Authority.