A third (31%) of HNWIs in Scotland want to pass on wealth but have put no plans in place as to how they will do this. Concerningly the same number (31%) have never spoken to their family about inheritance.

However, a number of HNWIs have taken positive steps with their financial planning. Over half (58%) have made a Will, followed by 31% have made financial gifts to loved ones or will continue to do so, 27% have met with a financial planner, 16% have put their wealth into a trust for loved ones and finally 20% have or plan to continue to make financial gifts to charity or have established a legacy or foundation. 

When comparing this with Rathbones’ research last year, positively there has been an uplift, with just 27% of Scottish HNWIs having made a Will in 2023. 

Kindar Brown, senior financial planner at Rathbones, said: “Making plans to pass on wealth is an essential part of responsible financial and personal management.

“It ensures that your legacy is handled in a way that reflects your intentions, provides for your loved ones, and maintains the harmony and financial stability of your family. Avoiding these important conversations for whatever reason could lead to disagreements and misunderstandings down the road and will not guarantee your inheritance plans are carried out as you wish.

“There is no time like the present and bringing your family together to discuss your plans and wishes can be invaluable and provide you with peace of mind. Once made, make sure you reassess regularly to ensure your wishes remain suitable to yours and your family’s circumstances.”

Understand annual exemptions

Everyone can gift up to £3,000 each tax year with no inheritance tax implications, irrespective of when you pass away. If you haven’t made gifts the year prior, the unused £3,000 carries on to the next tax year, however it does not carry on to the third year. Certain family members can also make gifts to a relative who is getting married or entering a civil partnership with no inheritance tax implications, so it’s worth being aware of these exemptions. Giving more sizable amounts could incur a tax charge if you were to die within 7 years. 

Gift to charity

Anything left to charity is free of inheritance tax, so it’s worth considering as a way to reduce your bill, while also benefiting a good cause. Additionally, if 10% of your net estate is left to charity the rate of inheritance tax applicable on death is reduced to 36% from 40% on the rest of your estate, reducing the amount of tax paid. Gifts of cash to charity made during your lifetime will also help reduce the IHT burden and, so long as you are a UK tax-payer, will usually qualify for 25% gift aid on the amount donated. 

Put assets in a trust

Putting assets, such as cash, property, or investments, into a trust can mean they are no longer part of your estate for inheritance tax purposes. It can be an effective way to manage how and when your wealth is distributed. However, the rules around trusts can be complex and have changed over the years, so seeking advice is crucial to any considering this option.