Do you want to create a legacy by passing on assets to your loved ones? There’s more than one way to do it, and you might want to combine several different options.
As part of your estate plan, you might want to consider who you’d like to benefit from your estate and how you will pass on assets. Here are four methods for transferring some of your wealth to loved ones.
1. Gifting during your lifetime
Your estate plan doesn’t just cover passing assets to loved ones when you pass away. You might also want to gift assets during your lifetime.
There are several key benefits to creating a living legacy.
First, it could help you provide financial assistance to your loved ones when they need it most. For example, you might gift a lump sum when your children are preparing to buy their first home. A well-timed gift could have a greater impact on your beneficiaries’ financial wellbeing than an inheritance. Plus, you also get to see the comfort your gift provides.
Second, if your estate could be liable for Inheritance Tax (IHT), gifting during your lifetime could reduce a potential bill. If the value of your entire estate is below the nil-rate band (£325,000 in 2026/27), then no IHT will be due. If the value of your estate exceeds this threshold, you might benefit from considering IHT and strategies to reduce it.
Keep in mind that not all gifts are considered outside your estate immediately for IHT purposes. Gifts that are not paid as part of your allowances may be included when calculating IHT for up to seven years after they are given.
In addition, take some time to understand the long-term implications that gift giving now would have on your financial security.
2. Using a will to pass on assets when you die
The traditional way to pass on assets is through a will after you die. You can use your will to name who you’d like to benefit from your estate.
You can choose how you want your assets to be distributed. You might:
- Leave a particular portion of your estate or certain assets to beneficiaries
- Name specific assets or items you’d like a person to inherit
- Pass on assets under certain circumstances. For example, you might state your home is for your child, but your partner can remain living there until they pass away.
While it is possible to write a valid will yourself, seeking legal advice could minimise the chance of mistakes occurring.
Once you’ve written your will, it’s important to keep it up to date to ensure it continues to reflect your wishes.
3. Completing an expression of wish to pass on your pension
Your pension isn’t usually covered by your will. Instead, you’ll need to complete an expression of wish form with each provider you hold a pension with.
This form states who you’d like to receive your pension wealth when you pass away. An expression of wish isn’t legally binding, but it is something your pension provider will take into account when making a decision.
From April 2027, pensions will be included in your estate for IHT purposes, so you may benefit from reviewing how you’d like to use your pension and pass it on.
4. Setting up a trust that allows you to retain control
A trust is a legal arrangement that holds assets for the benefit of your named beneficiaries. You may use a trust to pass on assets during your lifetime or when you pass away.
As settlor, you can set out how and when you’d like the assets in the trust to be used, which the trustee, who will manage the trust, will follow.
For example, you might decide to place assets in a trust for a child and state that the trustee may make withdrawals for educational purposes, and that the beneficiary can have full control of the assets once they turn 25.
Alternatively, you could state that the beneficiary may receive the dividends paid by investments, but they cannot sell the stocks and shares.
In some cases, you may still benefit from the assets placed in trust during your lifetime.
Like gifts, assets placed in a trust are not automatically outside your estate when making IHT calculations.
There are several different types of trust, some of which are complex. Often, it’s difficult or impossible to retrieve assets once they’ve been placed in a trust. As a result, it’s often a good idea to seek both financial and legal advice to ensure a trust suits your needs.
Get in touch to discuss your estate plan
If you have any questions about your estate plan and how you might pass on assets to loved ones, please contact us.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate cashflow modelling, will writing, estate planning, or trusts.