Inheritance and succession planning for substantial estates
For estates of meaningful size, inheritance tax is rarely the only planning issue. Substantial wealth raises questions about how it passes, to whom, in what structure, with what controls, and with what conversation around the values and expectations that should travel with it.
We work with clients on the technical planning, IHT mitigation, trusts, gifting, BPR, life cover and on the family conversations that decide what good succession actually looks like.
What we work on
Lifetime gifting. Annual exemption, the £3,000 gift allowance, and most importantly for high-income clients, gifts out of normal expenditure, which removes excess income from the estate without the seven-year clock that applies to capital gifts. Used properly, gifts out of normal expenditure can move very meaningful sums out of an estate over a working lifetime.
Trust structures. Discretionary trusts, interest-in-possession trusts, and bare trusts each serve different purposes. The right structure depends on what control the settlor wants to retain, who the beneficiaries are, what the assets are, and what the tax architecture needs to deliver.
Family Investment Companies. For families with significant wealth and multiple beneficiaries, an FIC can be an effective alternative or complement to trust structures, particularly post-2006 when the trust regime tightened. Whether an FIC is the right answer depends on the specific situation; it is genuinely useful for some clients and adds complexity without benefit for others.
Business Property Relief. For clients with qualifying business interests, BPR can deliver effective relief from IHT. The qualifying conditions require care, and recent and prospective changes to the regime, particularly around the cap on full relief mean the planning needs to be revisited rather than left static.
Pension architecture. The treatment of pensions for IHT has been moving. Historically pensions sat outside the estate for IHT purposes, which made them a structural planning tool. The direction of recent policy is to bring pensions into the IHT net. The detail matters for any client with significant pension wealth, and the planning needs to keep pace with implementation.
Life cover written into trust. For estates with predictable IHT exposure that cannot be planned away, life assurance written under trust provides liquidity to pay the bill without a forced sale of illiquid assets. The cover needs to be sized properly and structured correctly for the strategy to work.
The conversations that matter as much as the structures
The technical work above is necessary but not sufficient. For families with substantial wealth, succession planning is also about decisions that no spreadsheet captures, when to involve the next generation in the planning, how to prepare beneficiaries for an inheritance that will materially change their circumstances, how to balance equal treatment of children with different needs and capacities, and how to translate financial wealth into something the family can hold together over decades rather than dilute over generations.
These conversations are difficult, often delayed, and frequently the part of succession planning that matters most for whether the wealth ends up doing what the client wanted.
Why independence matters here
The structures and providers we use for IHT planning, BPR-qualifying portfolios, trust providers, life cover underwriters, FIC architecture vary enormously. The right BPR portfolio for one client sits with one provider, for another it sits with three different providers selected for specific characteristics. The right life cover for an estate with £8m of IHT exposure is not the same as the right life cover for an estate with £40m of IHT exposure.
In a restricted advice model, those answers are largely predetermined. In our model, they are determined by the situation.
FAQs
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Earlier than most clients do. The seven-year clock on most capital gifts means that planning has the largest effect when there is time for gifts to fall outside the estate. Many of the structures that work well include trusts, FICs, BPR-qualifying portfolios, also work better with lead time. That said, meaningful planning is possible at any stage, and clients in their seventies and eighties are often the ones for whom the planning is most urgent rather than least.
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The treatment has been moving. Pensions historically sat outside the estate for IHT purposes, which made them a useful structural planning tool. Recent policy has moved towards bringing pensions into the IHT net, with the implementation detail and effective date subject to ongoing legislative process. For any client with significant pension wealth, the planning needs to be specific to the current rules at the time of decision and revisited as the rules continue to evolve.
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For estate planning that goes beyond the financial planner’s scope, complex trust drafting, contested estates, international elements, technical tax counsel, we work alongside specialist solicitors and tax counsel. Most engagements involve a coordinated relationship with at least one estate specialist alongside the financial plan.
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For qualifying business interests held for the relevant period, BPR can deliver meaningful relief from IHT. The qualifying conditions are technical and easy to fall foul of the type of business activity, the form of ownership, and the holding period all matter. Recent and prospective changes to the regime, particularly around caps on full relief, mean BPR planning that was set up several years ago should be reviewed rather than assumed. We work with clients on the planning around qualifying business interests and on BPR-qualifying investment portfolios as a separate, post-exit planning tool.
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