The importance of estate planning

Successful estate planning helps you to better control the amount of tax you are liable to pay on the wealth you accumulate.

Successful estate planning

Estate planning is all about trying to find compromises between simple theory and awkward reality.

In theory, it’s simple: to avoid unnecessary IHT liabilities, you need to make sure you have made enough outright gifts, and sufficiently long ago, to mean that (with a valid Will) your estate (including gifts added back from the past seven years) is less than the available nil-rate band when you die (currently  325,000). In reality, life does not happen that way, because:

— You don’t know when you’re going to die.
— You’ll want to make provisions for your spouse or partner.
— You may be wary of making too many lifetime gifts, as you may need the capital in later life (perhaps to cover care costs).
— You may not think it wise to make lifetime gifts while the recipients are still relatively young. — You may not be able to afford to make sufficient lifetime gifts.

This is why estate planning is about trying to find compromises between theory and reality, which is made all the more difficult by a range of anti-avoidance provisions. It will frequently involve a holistic approach; for example, how you arrange your retirement plans will usually have a knock-on effect on your eventual IHT liability. The most important estate planning tools include:

— A carefully drafted, up-to-date Will.

Lifetime gifts

Bonds tend to fluctuate in value less than shares and should repay your original investment at the end of a fixed term. However, the scope for your money to grow is usually limited in comparison to the growth achieved historically by shares, and there is the possibility that the issuer could default on the loan.

Fluctuations in interest rates can also affect the value of a bond – generally when interest rates rise, bond prices fall and vice versa. Although bonds are usually considered medium risk, this depends hugely on who is issuing them. Bonds issued by the UK Government are called Gilts and are very safe, whilst the risk involved in corporate bonds is dependent on the business issuing them. The level of income a bond pays reflects the risk you are taking – a company with a higher risk of default will have to reward investors with a higher yield.




These allow you to control the gifts you make by way of a third party (i.e. the trustees) who will act as an intermediary between yourself and your beneficiaries. You can choose the trustees and can even be one yourself if you wish. Your trustees’ actions are governed by the terms of the trust set up to receive the gift. These terms can be as rigid or flexible as you want.


These are generally small, but regularly making use of them can help whittle down your taxable estate over time. The normal expenditure gifts exemption is a good example of this; giving away investment income that you would otherwise allow to accumulate is a straightforward and painless way of trimming down your estate.




Business and agricultural reliefs are generous for both businesses and landowners. Even if you do not currently fall into either ownership category, you may still be able to benefit from these reliefs by making and holding appropriate investments. It may even be possible to secure business relief through an Individual Savings Account (ISA). Whenever you make an investment to secure business property relief, it is essential to carefully consider the risk you are exposing yourself to.

Tailored investment products

Over the years, investment structures have been developed that go some way towards allowing you to make a gift and retain the income from it (something IHT anti-avoidance rules are designed to prevent). It may be possible to use existing investments in such structures, thereby avoiding the tax and other consequences of their sale and reinvestment.


HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Will writing is not part of the Openwork offering and is offered in our own right. Openwork Limited accept no responsibility for this aspect of our business. Will writing is not regulated by the Financial Conduct Authority.

Pension arrangements

These do so much more than simply providing you with retirement income. For example, the lump sum death benefits that feature as part of most pension arrangements are usually IHT-free. During your retirement, a solid pension income will make it much easier to make lifetime gifts or take advantage of the normal expenditure gifts exemption.

Life assurance

If planning cannot eliminate all of the potential IHT liability on your estate (and usually it won’t) then life assurance can be a valuable backstop. IHT is due six months following the last day of the month of death; therefore, an appropriate life policy can help to pay that bill. Otherwise, your executors may need to take out a loan, as they cannot realise the assets in your estate until they have been granted probate – which in turn cannot take place until the IHT bill is settled.


Advice that suits you

For personalised financial advice to suit you at various stages of your life circumstances, please get in touch.

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Vincent has looked after me for the last twenty years, and is always up with the current situation and offers reassurance when times get a little tough. I have absolute faith in his judgement and recommend his services in all fields of finance. Geoffrey

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