Estate planning means organising your financial affairs and how your assets will be distributed to reflect your wishes after your death.
Understandably, this can be a difficult area of your financial planning, both for you and for your family.
However, it’s also one of the most important conversations you can have. Establishing an optimal financial plan for your estate and setting out your wishes in a will are the first steps.
The next step is to involve your family and any other interested parties, so they have a clear understanding of what you’d like to happen and why when you’re gone.
Conversations now can prevent future misunderstandings about your estate
Upcoming changes to Inheritance Tax (IHT) make this a good time to review your estate plan and start transparent conversations with your loved ones.
According to Today’s Wills and Probate, just one in six parents over the age of 55 discuss inheritance with their children.
Avoiding the topic, however, can lead to tax inefficiencies, misunderstandings, disputes, and even litigation, with the Guardian reporting that up to 10,000 people in England and Wales dispute a will each year.
A bereavement brings heightened emotion; a conversation upfront can reduce the financial and administrative burden during a time of grief.
Having these conversations now is crucial – you can’t do it when you’re gone. While it might feel uncomfortable, talking to your family now could spare them harder conversations later.
Read on to discover four benefits of discussing your estate plans with your family.
1. Minimising your tax liability
This is a key financial reason to be completely open about how you’re planning to distribute your estate. New rules from April 2027 will generally see any unused pension pots added to the deceased’s estate for IHT purposes for the first time.
According to IFA Magazine, this will see the number of estates liable for IHT rise from 4.6% to 6%.
For the tax year 2025/26, the threshold for an estate to pay IHT is £325,000 (the “nil-rate band”), with wealth above this threshold usually subject to IHT at 40%. However, if you leave your entire estate to your spouse or civil partner, it will be exempt from IHT. And if you leave your property to your children or grandchildren, your threshold could rise to £500,000 (thanks to the “residence nil-rate band”).
If your estate is below the threshold, you can pass your unused nil-rate band amounts to your spouse or civil partner, increasing their IHT-free thresholds.
Making gifts is one way to potentially lower the value of your estate for IHT purposes. Gifts to charity, for example, are immediately removed from your estate for IHT purposes. Leave more than 10% of your entire estate to charity, and the tax liability on your remaining assets could be reduced to 36%.
Explaining to your family why you’ve made a large gift to charity could help them understand that, rather than reducing their inheritance, it may simply lower the overall IHT bill and preserve more value for your heirs.
Gifting rules are complex, and there are many caveats to consider; we recommend you speak to us about your specific circumstances.
2. Reducing disputes
Sadly, disputes do happen, especially in times already loaded with emotion. Making your wishes clear to all involved can help to reduce disputes or even prevent them altogether.
Set out your plans for dividing your estate in your will. You could also include a letter of wishes. While not legally binding, a letter of wishes can support your will by providing more detail about what you’re leaving and why. For example, you might ask a friend to care for your pet and provide them with a regular payment or a lump sum to cover their expenses.
3. Managing expectations and gauging opinions
An open conversation about what people want and expect could throw out some surprises. It may be that certain family members are less interested in money and more interested in family heirlooms. Conversely, you may discover certain presumptions about your estate that are at odds with your wishes.
Open discussion ensures everyone knows what to expect and lets you tailor your plan to incorporate specific requests where appropriate.
4. Giving your executors and trustees upfront notice
Your executors are in charge of managing the administration of your estate, while trustees oversee any trusts you’ve put in place.
Always check that potential executors and trustees are happy to be assigned this role before you appoint them, and explain what it will entail.
Having this conversation also gives you a good chance to talk through any potential points of confusion, enabling a smoother process when the time comes.
Get in touch
Estate planning is a bespoke process. If you’d like to talk to us about how to get the most effective outcomes for your family, please get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients 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 estate planning or tax planning.