Lesley McKnight

Making a will is one of the most important things you can do to protect your loved ones and your assets after you pass away, and while it will never be an easy subject, it is essential for giving your family peace of mind. 

Family circumstances may change, assets may be acquired, or – as is particularly important this year – tax regimes can be amended by the Government, underlining the importance of updating your will annually. 

The start of a new financial year is as good a time as any to consider what happens with your assets when you pass away – particularly in light of the changes to inheritance tax (IHT) relief announced in the Autumn Budget. 

Dying without a will in place can be incredibly difficult for your nearest and dearest. Intestacy legislation helps to determine how assets are distributed, but the costs involved with appointing an executor or obtaining a bond of caution – a form of insurance policy – can quickly mount up, and that is before any IHT liabilities are dealt with. Payment is due six months following a death, which doesn’t leave a lot of time to work everything out and only adds to the stress at an incredibly sensitive time.

Currently only one in 20 estates pay IHT, but this is set to change. From April 2027, pensions will no longer be exempt, meaning many more people will exceed the tax-free threshold. This currently stands at £325,000 for most individuals, with an additional £175,000 if they own a home. Married couples or civil partners can combine their allowances, potentially reaching a £1 million tax-free threshold. These bands are frozen until 2030, so should be factored in when writing your will.  

We would always suggest you consult with a lawyer and financial adviser to support decision-making, but there are options that can be explored to help mitigate the tax burden your family may face. Among them are three different types of trusts: absolute, discretionary and life rent.

The complexity and cost of setting up a trust means it may not be appropriate for every family, but they can be a useful tool to protect assets as part of long-term plans and enable people to nominate beneficiaries. Absolute trusts define the individuals upon set up, whereas discretionary trusts outline different classes of beneficiaries, such as grandchildren. A life rent trust, often used by blended families, allows someone to give their surviving partner or spouse the option to remain living in the same home, before ultimately passing on ownership to their children from a previous relationship.  

In each case, while the provision must be written into your will, you will also need the guidance of an expert to set up and manage these trusts. A will is a core piece of the puzzle. 

The most important thing is that you do not leave it up to chance. Take the time to set out a tax-efficient plan of what you’d like to happen with your assets and discuss this with your family, while you have the opportunity to do so.

Lesley McKnight is private client partner at full-service law firm Gilson Gray