Along with retirement planning and having enough for everyday spending, ensuring you have left enough in your legacy is one of the most common financial planning aims.
But the most considered estate plans are rarely about simply leaving behind a specific sum of money. Rather, they are tailored to support the futures of the people who matter most to you.
Deciding how much wealth to pass on and the best way to do so involves having open conversations with your loved ones, as well as careful consideration of your own needs.
Read on to discover four steps that can help you decide what to leave to your beneficiaries.
1. Make sure your own needs are covered
When thinking about the legacy you would like to leave behind, it’s important not to neglect your own financial needs.
Life is unpredictable, and your circumstances can quickly change. So, before deciding how much wealth to pass on, you should first ensure that your own needs are fully covered.
This might include maintaining your desired lifestyle in retirement, building an emergency fund for unexpected expenses, and making a plan for how to cover potential future care costs for you or your partner.
Once your financial future is secure, you can then start making plans for how to support your loved ones. After all, the support you can offer them in your lifetime will be all the better if you are financially stable.
A financial planner can use cashflow modelling to help with this. By projecting how your income, expenditure, and assets may change over time, you can see how much you may require for your own needs and what you could have left to pass on.
2. Make the most of your available allowances
Understanding how much Inheritance Tax (IHT) your estate is likely to be liable for is an important part of determining how to distribute your assets.
In the 2026/27 tax year, the main IHT allowances include:
- £325,000 standard nil-rate band – This is available for everyone.
- £175,000 residence nil-rate band – This is available if you pass your main home to direct descendants, though it tapers for estates worth more than £2 million.
- Spousal exemption – This lets you pass on anything to your spouse or civil partner IHT-free, including unused nil-rate bands.
These allowances mean a single estate can pass on up to £500,000 free from IHT, while couples can pass on up to £1 million, with careful planning.
So, when thinking about how much to leave to your beneficiaries, it’s important to consider these allowances, as there may be benefits to leaving certain assets to your spouse or direct descendants that could otherwise be lost.
Beyond the standard allowances, other reliefs and exemptions can be useful for determining how to distribute your estate. These include:
- Business Relief (BR) and Agricultural Relief (AR) – Certain business and agricultural assets can qualify for up to 100% IHT relief.
- Assets held in trust – These typically sit outside of your estate for IHT purposes.
- Gifting allowances – Making gifts during your lifetime can allow you to see loved ones benefit from your wealth while reducing the value of your estate for IHT purposes. This can be particularly useful when passing on assets with sentimental value.
Understanding your allowances and reliefs is key to determining how much you should leave to your beneficiaries, as it helps ensure your legacy is as tax-efficient as possible.
3. Understand your beneficiaries’ goals
Once you have ensured your future needs are covered and you understand your IHT exposure, you can then build a legacy plan around your beneficiaries’ goals.
What works for one may not be appropriate for another. For example, a beneficiary with young children may benefit from money being put into a Junior Stocks and Shares ISA to support future expenses, such as university costs. Meanwhile, another beneficiary who runs a business could benefit from investment in their company.
In some cases, placing assets into trust may be the best option, particularly if the beneficiaries are vulnerable or require ongoing support.
Indeed, you might not even divide your estate equally but choose to leave more to those who need it.
If your beneficiaries are already financially secure, you may wish to leave part of your estate to charitable causes. This can also improve the tax efficiency of your estate, since if at least 10% of your net estate is left to charity, the IHT on the remainder of your estate falls from 40% to 36%.
In every instance, it’s important to tailor your approach to your beneficiaries’ needs to ensure they get the full benefit of your legacy. This requires open and honest conversations about their needs and what they can expect from you.
4. Work with a financial planner
A financial planner can help you assess your current position, determine your long-term financial needs, and then create a legacy plan that enables you to support loved ones without compromising your own lifestyle.
They can also project your potential IHT liability and use cashflow modelling to show how different planning strategies might affect your finances over time.
Moreover, they can work with you and your beneficiaries to ensure your estate plan is best set up to support their goals as effectively and efficiently as possible.
As your finances, family circumstances, and legislation change over time, a financial planner can help ensure that your plans remain aligned with your goals and continue to work as intended.
To speak to a financial planner, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
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