Estate Planning Essentials: Protecting Your Wealth for Future Generations

Estate planning means different things to different people. Some might ask, “Does it matter to me personally?” Others are more concerned about ensuring their beneficiaries receive the maximum from their estate. For many, estate planning isn’t something they feel the need to worry about—until it’s too late.

However, with inheritance tax thresholds frozen and the possibility that pensions may be included within estates from 2027, more families than ever could face unexpected tax bills. While it’s easy to take the view that “it won’t affect me,” the reality is that managing an estate—especially during an emotionally distressing time—can place a significant burden on loved ones.

Importantly, estate planning isn’t just about taxes. It’s about control, protection, and peace of mind. In this guide, we explore the key areas of estate planning and how you can take proactive steps to protect your wealth for future generations.

Understanding the Foundations of Estate Planning

Many people believe that estate planning is something only older generations need to consider. But imagine you’re 25, have just purchased your first home, and then something unexpected happens—like a serious accident. Without a will in place, your estate would fall under the rules of intestacy. This could result in your assets being distributed to individuals you never intended.

Similarly, if you suffer a stroke or lose mental capacity, who makes decisions on your behalf? A Lasting Power of Attorney (LPA) allows someone you trust to manage your finances or health and welfare if you’re unable to do so.

Estate planning also includes trusts, which are used for:

  • Managing assets on behalf of children or vulnerable individuals,

  • Minimising tax liabilities,

  • Ensuring assets are protected for future use,

  • Reducing the risk of legal disputes.

The Role of a Will: Ensuring Your Wishes Are Followed

While AI-generated wills might seem convenient, they carry risks. A poorly drafted will can result in costly errors and legal complications. Working with a qualified solicitor or estate planning specialist ensures your will is robust and legally sound.

Key points to consider:

  • Appointing executors to manage your estate.

  • Naming guardians for minor children.

  • Regularly reviewing and updating your will as circumstances change.

If you die without a will, your estate will be distributed according to intestacy rules, which may not align with your wishes. This can also delay the administration of your estate, as letters of administration are required instead of probate.

Trusts Explained: Flexibility, Control, and Protection

Trusts are powerful tools for estate planning. They offer control over how and when your assets are distributed and can shield your wealth from unnecessary tax or legal claims.

Common uses for trusts include:

  • Asset management for minors or individuals with disabilities.

  • Tax optimisation by removing assets from your estate.

  • Protection against divorce or creditor claims.

  • Estate planning by creating a structure for wealth transfer.

Types of trusts:

  • Living Trusts (inter vivos): Created during your lifetime.

  • Testamentary Trusts: Activated upon your death via your will.

  • Revocable Trusts: Can be changed or cancelled during your lifetime.

  • Irrevocable Trusts: Once established, they are fixed.

Example: Parents may choose to place assets in a discretionary trust so that their children benefit from the assets, but future spouses or partners do not.

Inheritance Tax Planning: Passing on More of Your Wealth

Inheritance Tax (IHT) is charged at 40% on estates over £325,000. This threshold can increase to £500,000 if a main residence is passed to direct descendants. For married couples or civil partners, unused allowances can be transferred, potentially increasing the threshold to £1 million.

Ways to reduce IHT:

  • Gifting while alive: Gifts made more than seven years before death are typically free from IHT. Taper relief applies between years 3 and 7.

  • Annual exemption: You can gift up to £3,000 each year without it affecting your estate.

  • Wedding gifts: Gifts for weddings or civil partnerships also qualify for exemptions.

  • Charitable donations: Gifts to registered UK charities are exempt from IHT.

Regular reviews of your estate can help identify new opportunities for tax efficiency and ensure your plans remain up to date.

Using Life Insurance and Pensions Effectively

For larger estates, placing life insurance in trust can remove the policy from your taxable estate. This ensures that the payout goes directly to your beneficiaries—quickly and tax-free.

Pensions are currently not considered part of your estate for IHT purposes. However, this may change from 2027. It’s crucial to:

  • Keep nomination forms up to date,

  • Understand how your pension death benefits interact with your will,

  • Consider pensions as a core part of your estate planning strategy.

Power of Attorney and Advance Directives

Creating a Lasting Power of Attorney (LPA) is a crucial aspect of estate planning.

There are two types:

  • Property and Financial Affairs LPA: Covers bank accounts, property, and financial decisions.

  • Health and Welfare LPA: Covers medical care, daily living, and life-sustaining treatment decisions.

Why create an LPA?

  • Protects your interests if you lose capacity.

  • Reduces delays in critical decision-making.

  • Provides peace of mind for you and your loved ones.

  • Helps avoid costly and time-consuming Court of Protection applications.

Why Work with a Financial Planner on Estate Planning?

At Ifamax, we believe estate planning is most effective when done collaboratively. We work closely with solicitors, accountants, and other professionals to create a strategy tailored to your specific needs.

Our role is to:

  • Coordinate the financial aspects of your estate plan,

  • Ensure your values and wishes are reflected in the structure,

  • Review your plan regularly to adapt to any changes in your circumstances or legislation.

We also engage with your family, where appropriate, to foster transparency and reduce the risk of future conflict.

Conclusion: Leave a Legacy, Not a Burden

It’s estimated that around 10,000 disputes over wills and estates occur each year in England and Wales. Many of these could be avoided through clear and proactive estate planning.

At Ifamax Wealth Management, we help clients take control of their estate planning—minimising tax, reducing risk, and preserving family harmony.

Speak to our team today for a confidential estate planning review and start building a legacy that truly reflects your life’s work.

Risk warning  

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.  

 

Ashton Chritchlow