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Tax-Efficient Estate Planning for High Net Worth Clients UK

· 45 min

Note: The following scenario is fictional and used for illustration.

James Richardson, a wealth manager at a London private client firm, sat across from his clients—a couple in their mid-50s with a £4.2 million estate including properties, AIM shares, and substantial pension pots. They'd built their wealth through a successful business and prudent investing. But under current law, their heirs faced a £1.28 million inheritance tax bill.

Worse, with the pension IHT changes coming in April 2027 and the business property relief restrictions from April 2026, their liability could climb even higher without immediate action. James knew he had a narrow window to implement effective mitigation strategies.

This scenario is playing out in advisory firms across the UK. With inheritance tax receipts hitting £8.2 billion in 2024/25—a 10.8% increase year-on-year—and frozen thresholds creating "fiscal drag," more estates are being pulled into the IHT net. For wealth managers advising high net worth clients with estates over £2 million, the stakes have never been higher.

This comprehensive guide equips private client advisors with practical, tax-efficient estate planning strategies for HNW clients, focusing on the critical changes coming in 2026 and 2027.

Table of Contents

Understanding the HNW IHT Landscape in 2025-2027

High net worth estate planning in the UK has entered a critical period of change. While HMRC technically defines ultra-high net worth as estates over £20 million, most wealth managers work with clients whose estates exceed £2 million—the threshold where inheritance tax planning becomes essential and complex.

The numbers tell a stark story. Net taxpaying estates valued £1 million or more accounted for 81% (£4.7 billion) of total IHT liability in 2020-21, despite representing just 4.3% of all estates. The average inheritance tax bill has now reached £214,000, but for estates between £1 million and £1.5 million, bills typically exceed £160,000.

Current thresholds create a squeeze:

  • Nil Rate Band (NRB): £325,000 per individual (frozen since 2009)
  • Residence Nil Rate Band (RNRB): £175,000 when main home passes to direct descendants
  • Combined allowance: £500,000 individual, £1 million for married couples
  • RNRB taper: Reduces by £1 for every £2 over £2 million estate value, eliminated entirely at £2.35 million for individuals

The standard IHT rate of 40% applies to assets above available thresholds. But here's the challenge: these thresholds are now frozen until April 2030, while property values and investment portfolios continue to grow. This "fiscal drag" pulls more estates into the IHT net each year, particularly affecting clients whose wealth sits just above the £2 million RNRB taper threshold.

Despite this exposure, research suggests only 26% of HNW individuals currently have an inheritance tax strategy in place. For wealth managers, this represents both a significant risk to client relationships and a critical opportunity to demonstrate value through proactive planning.

Critical Tax Changes Coming in 2026 and 2027

Two major legislative changes create unprecedented urgency for immediate planning. Your clients have a narrow window to act before these rules fundamentally alter HNW estate planning.

April 2026: Business Property Relief and Agricultural Property Relief Restrictions

From 6 April 2026, business property relief (BPR) and agricultural property relief (APR) will be capped at a combined £1 million of assets qualifying for 100% relief. Assets above this threshold will receive only 50% relief, creating an effective IHT rate of 20% on the excess.

This affects:

  • AIM shares (relief reduced from 100% to 50% in all circumstances)
  • Unlisted company shares in trading businesses
  • Interests in trading businesses and partnerships
  • Agricultural land and farming businesses

The government expects approximately 2,000 estates annually will be affected, with around 500 claiming APR and 1,000 holding unlisted shares. But critically, anti-forestalling rules already apply to gifts made between 30 October 2024 and 5 April 2026 if the donor dies on or after 6 April 2026.

Consider a client with £3 million in AIM shares. Under current rules, these qualify for 100% BPR—zero IHT liability. From April 2026, only the first £1 million receives full relief. The remaining £2 million gets 50% relief, leaving £1 million exposed to IHT. At 40%, that's a £400,000 tax liability that didn't exist before.

April 2027: Pension Death Benefits Become Subject to IHT

From 6 April 2027, unused pension funds and death benefits will be included in the estate value for IHT purposes. This closes what the government calls a "loophole" from the lifetime allowance abolition.

The impact is substantial. The government estimates 10,500 estates—approximately 1.5% of total UK deaths—will become liable for IHT where they weren't previously. By 2029-30, this reform alone is projected to raise £1.5 billion annually.

The real concern is potential double taxation. If a client dies after age 75, beneficiaries could face up to 67% combined taxation on inherited pensions—40% IHT plus income tax at their marginal rate on death benefits.

Personal representatives (not pension administrators) will be liable for reporting and paying IHT on pension assets. Death in service benefits from registered pension schemes remain exempt, as do pension death benefits paid to a UK-domiciled spouse or civil partner.

The Residence-Based Taxation Shift

Already in effect from April 2025, the UK has shifted from domicile to residence-based taxation. Clients who are UK resident for 10 out of the last 20 years now face worldwide IHT liability. For international clients and non-doms, excluded property trusts must be established before reaching this 10-year threshold—time-sensitive planning is essential.

Immediate Action Items Before April 2026

You have approximately 18 months to implement BPR/APR strategies before the rules change. Here's your prioritized action checklist for affected clients.

1. Review all BPR-qualifying assets immediately

Identify every client holding AIM portfolios, unlisted company shares, trading businesses, or partnerships. Don't wait for annual reviews—this work needs to happen now.

2. Quantify exposure above the £1 million cap

Calculate precisely which assets fall above the combined BPR/APR £1 million threshold. For a client with £2 million in qualifying assets, £1 million will lose 50% of its relief, creating a new £200,000 IHT exposure (£1 million × 50% × 40% rate).

3. Evaluate accelerated gifting strategies

For clients who can afford to gift, potentially exempt transfers (PETs) made before April 2026 may be strategic—but remember the anti-forestalling rules apply to gifts made after 30 October 2024. Work with a specialist tax advisor to assess whether gifts made in this period could be challenged by HMRC.

4. Restructure AIM portfolios strategically

With AIM shares now receiving only 50% relief regardless of amount, reassess whether maintaining these holdings makes sense versus other investment vehicles. The loss of full BPR changes the risk-return calculation fundamentally.

5. Assess family business succession plans

If clients own trading businesses, evaluate whether accelerating succession planning makes sense before April 2026. Transfers or restructuring completed before the deadline could preserve 100% relief, but only if the donor survives seven years for a PET to become fully exempt.

6. Document everything meticulously

Any gifts made between 30 October 2024 and 5 April 2026 require thorough documentation to defend against potential anti-forestalling challenges. Record the commercial rationale, obtain independent valuations, and maintain evidence that planning would have occurred regardless of the legislative changes.

7. Understand trust implications

For relevant property trusts, the new £1 million allowance refreshes every 10 years (instead of seven years for lifetime gifts). This changes the mathematics of trust planning for business and agricultural assets significantly.

The cost of inaction is measurable and substantial. A client with £3 million in BPR-qualifying assets who does nothing faces approximately £400,000 in additional IHT liability. Time is the scarcest resource in this planning window.

Pension Planning Strategies Before April 2027

The inclusion of pensions in IHT calculations from April 2027 fundamentally changes retirement and estate planning advice. Here's how to help clients optimize their position.

Reassess withdrawal strategies immediately

For decades, advisors recommended clients preserve pensions and spend other assets first—pensions sat outside the estate and offered tax-efficient inheritance. From April 2027, this conventional wisdom reverses for many clients.

Clients under 75 should reconsider the sequencing of withdrawals. If a £1 million pension will be subject to 40% IHT (£400,000), it may be more tax-efficient to access pension funds during lifetime and gift the proceeds, potentially benefit from annual exemptions, or use funds to purchase life insurance in trust.

Model the true cost of pension inheritance

Help clients understand the numbers. A £1 million pension pot previously passed to beneficiaries IHT-free. Under the new rules:

  • Estate value increases by £1 million
  • IHT liability: £400,000 (at 40%)
  • Net pension value for beneficiaries: £600,000
  • If beneficiaries then pay income tax on withdrawals: further erosion of value

For clients over 75, the position is worse. Beneficiaries face 40% IHT plus income tax on death benefits, potentially reducing a £1 million pension to £400,000 or less after combined taxation.

Review and update beneficiary nominations

Expression of wish forms should be current and tax-efficient. While these are non-binding, most pension schemes follow them. Consider whether directing benefits to a spouse (IHT-exempt if UK domiciled) or to a discretionary trust makes more sense under the new rules.

Consider earlier pension access for some clients

For financially secure clients with substantial pension pots, accessing pensions before death may be more tax-efficient than leaving them to beneficiaries subject to 40% IHT. This is a complete reversal of previous planning approaches and requires careful modeling of individual circumstances.

Use life insurance to cover the new liability

A whole-of-life policy written in trust can provide funds to pay the IHT liability on pension assets without increasing the estate value. For a client with a £1 million pension, a £400,000 policy costs significantly less than the tax saving it preserves.

Coordinate with divorce settlements

Recent divorce cases should be reviewed. Pension sharing orders completed without considering the post-2027 IHT position may need reassessment. The IHT liability fundamentally changes the value equation for pension assets in divorce settlements.

This is time-sensitive work. Clients have until April 2027 to reposition assets and adjust strategies. The conversations you have over the next 18 months will determine whether pension assets pass efficiently or suffer punitive taxation.

Classic IHT Mitigation Strategies That Still Work

Despite the changes coming in 2026 and 2027, foundational estate planning strategies remain effective. For HNW clients, these form the bedrock of any comprehensive plan.

Lifetime Gifting and the 7-Year Rule

Potentially exempt transfers (PETs) become fully IHT-exempt if the donor survives seven years after making the gift. For gifts made three to seven years before death, taper relief applies, reducing the tax charge progressively.

For a £500,000 gift, the IHT saving is £200,000 if the donor survives seven years. Even with partial survival, taper relief provides substantial savings: gifts made 5-6 years before death receive 60% relief, reducing the tax to £80,000 instead of £200,000.

Annual Exemptions and Small Gifts

Every client can gift £3,000 annually without IHT implications, with one year's unused allowance carried forward. Additionally, gifts of up to £250 per recipient are exempt (though not to someone who's received part of the £3,000 allowance).

While these amounts seem modest for HNW clients, systematic use over many years, combined with investment growth in recipients' hands, compounds significantly.

Normal Expenditure Out of Income

This is the most overlooked relief in HNW planning. Gifts made regularly from income (not capital) that don't reduce the donor's standard of living are immediately exempt—with no monetary limit.

For a client with £200,000 annual income who lives comfortably on £120,000, regular gifts of £80,000 annually qualify for immediate exemption. Over 10 years, that's £800,000 removed from the estate with no seven-year waiting period. Proper documentation is essential: maintain records showing income, living expenses, and regular gifting patterns.

Spousal Exemptions

Transfers between UK-domiciled spouses are unlimited and IHT-exempt. This allows estate equalization—transferring assets from the wealthier spouse to balance estates and maximize use of both partners' allowances.

For non-UK domiciled spouses, transfers are limited to £325,000 (the nil rate band amount). Planning for international couples requires specialist advice to optimize cross-border structures.

Strategic Charitable Giving

Estates giving 10% or more to charity benefit from a reduced IHT rate of 36% instead of 40%. For a £5 million estate, giving £500,000 to charity saves the estate £60,000 in IHT while supporting causes the client values.

The mathematics works because the 4% rate reduction applies to the entire taxable estate. It's genuinely tax-efficient philanthropy.

Trust Structures

Trusts remain powerful planning tools, though they come with immediate and ongoing tax charges. Discounted gift trusts offer immediate IHT reduction for retained interest, calculated actuarially. Loan trusts allow clients to retain access to capital while removing growth from their estate.

For bare trusts benefiting minor children, assets are outside the settlor's estate and taxed on the beneficiary. Discretionary trusts offer flexibility but trigger a 20% entry charge on assets above the nil rate band, plus 10-year periodic charges.

Life Insurance in Trust

A whole-of-life policy written in trust provides liquidity to pay IHT without increasing estate value. For property-rich clients, this prevents forced sales to meet tax bills. Premiums are typically affordable relative to the protection provided—a £500,000 policy might cost £3,000-£5,000 annually for a healthy 60-year-old.

These classic strategies remain the foundation. The art is combining them strategically to maximize IHT reduction while maintaining client security and flexibility.

Advanced Strategies for Ultra-High Net Worth Estates (£5m+)

For clients with estates exceeding £5 million, standard strategies aren't sufficient. These sophisticated techniques require specialist legal and tax advice but can achieve substantial tax savings.

Family Investment Companies (FICs)

A family investment company allows clients to retain control while gifting economic value to family members. Parents hold fixed-rate preference shares (providing income) while children hold ordinary shares (capturing growth). The structure offers asset protection, succession control, and IHT efficiency, though setup and ongoing costs are significant.

Excluded Property Trusts

For non-UK assets held by non-domiciled individuals (or those within the 10-year residence threshold), excluded property trusts can shelter assets from UK IHT entirely. Timing is critical—trusts must be established before the residence threshold is breached. For international clients, this is sophisticated planning that requires cross-border tax expertise.

Offshore Bonds with Assignment Strategies

Offshore investment bonds offer tax-deferred growth with the ability to assign segments to beneficiaries. When structured correctly, growth can be passed to lower-rate taxpayers with top-slicing relief reducing income tax charges. Combined with trust wrappers, these can be powerful estate planning vehicles.

Deeds of Variation

Post-death planning through deeds of variation allows beneficiaries to redirect inheritances within two years of death. If the surviving spouse doesn't need the entire estate, assets can be redirected to children or into trust, reducing IHT on the second death. This requires careful drafting and family consensus but offers flexibility unavailable during lifetime.

Pilot Trusts

Small trusts established with modest amounts (often £10) preserve the settler's nil rate band for future use. Multiple pilot trusts can be created, each with its own nil rate band, allowing up to £325,000 to be added to each trust later without triggering immediate charges. This is technical planning requiring specialist legal input.

Discounted Gift Schemes

These schemes provide immediate IHT reduction based on actuarial calculation of the donor's retained interest. A 70-year-old might gift £500,000 while retaining the right to 5% annual income. The actuarial discount might be 40%, so £200,000 is immediately outside the estate, while £300,000 remains but is falling as income is paid.

Family Limited Partnerships

These allow clients to gift economic interest (as limited partners) while retaining management control (as general partner). For business owners or those with investment portfolios, this structure balances wealth transfer with continued oversight. Valuation discounts for minority interests can enhance IHT efficiency.

Strategic Residence Planning

For international clients, carefully managing UK residence status minimizes worldwide IHT exposure. This involves detailed tracking of days present, understanding treaty provisions, and timing the establishment of excluded property trusts. It's complex, specialist work requiring coordination between UK and overseas advisors.

A worked example:

A client with an £8 million estate uses a combination of family investment company (£3 million of growth assets), excluded property trust (£2 million overseas assets), and strategic gifting with taper relief to reduce IHT from approximately £2.7 million to under £800,000 over a 7-10 year planning period. The saving of nearly £2 million justifies the substantial professional fees for specialist advice and ongoing administration.

Critical warning:

All advanced strategies require specialist legal and tax advice. Wealth managers should identify opportunities and coordinate the planning team, but implementation must be handled by solicitors and tax specialists with expertise in these structures. The cost of getting complex planning wrong—through HMRC challenges, failed structures, or unintended tax charges—far exceeds professional fees.

Property-Rich, Cash-Poor Clients: Special Considerations

Many HNW estates are property-heavy with limited liquid assets to pay IHT bills. A £3 million estate might comprise a £2.5 million home with only £500,000 in other assets, creating a £700,000 IHT liability but only £500,000 available to pay it.

This is particularly challenging because the Residence Nil Rate Band only applies when the home passes to direct descendants, and it tapers away entirely for estates above £2.35 million (or £2.7 million for married couples). Your client's valuable home creates IHT exposure while providing no relief.

Solutions for Property-Rich Clients

Downsizing with gifting

Moving from a £2 million home to a £1 million property releases £1 million for gifting. Critically, the RNRB includes downsizing provisions—if the proceeds are gifted to direct descendants, the RNRB remains available. This allows clients to reduce estate value while maintaining tax reliefs.

Equity release to fund gifting

For clients who don't want to move, equity release provides liquidity for gifts without selling the home. The loan reduces the estate value (it's a liability), while the gifted proceeds start the seven-year clock for IHT exemption. This requires careful modeling—interest rates on equity release are typically higher than standard mortgages.

Property in trust

Transferring property to trust triggers an immediate 20% IHT charge on value above the nil rate band, but removes all future growth from the estate. For a £2 million property appreciating at 4% annually, the growth over 15 years is approximately £800,000. An immediate £270,000 charge ((£2m - £325k) × 20%) may be worthwhile to shelter £800,000 of growth.

Life insurance for liquidity

A whole-of-life policy written in trust provides funds to pay IHT without forcing property sales. For a £700,000 policy covering the IHT bill, annual premiums might be £8,000-£12,000 for a healthy 65-year-old. Over 20 years, the total premium cost of £240,000 is substantially less than the £700,000 tax it covers.

Sale to children with market rent

Selling property to adult children removes it from the estate, but the parent must pay market rent to avoid reservation of benefit rules. This can work where children have resources to purchase (perhaps with mortgage), and rental payments fund the parents' other living costs. It's technically complex and requires legal advice.

HMRC Payment Arrangements

If liquidity is insufficient, HMRC allows IHT on property to be paid in 10 annual installments. However, interest accrues on the outstanding balance, and the property cannot be sold without settling the full liability. This is a fallback option, not a planning strategy.

A Real Scenario

Consider Elizabeth, a widow with a £3 million estate: £2.5 million home and £500,000 investments. Her IHT liability is approximately £700,000 (£3m - £500k allowances × 40%). She has only £500,000 liquid assets—£200,000 short.

Solution implemented:

Elizabeth purchased a £700,000 whole-of-life policy in trust (annual premium £10,000). She also downsized to a £1.5 million property, gifting the £1 million proceeds to her children. This reduced her estate to £2 million (within the RNRB taper threshold), eliminated the IHT liability entirely, and provided the life insurance as a safety net. The £10,000 annual premium was easily affordable from her investment income.

The property-rich challenge is solvable, but requires creative structuring and often a combination of approaches. Early planning is essential—these strategies can't be implemented in the months immediately before death.

Common Mistakes Advisors Should Help Clients Avoid

Estate planning errors reduce effectiveness and can create unintended consequences. Here are the most frequent mistakes in HNW planning.

Mistake 1: Failing to act before April 2026/2027 deadlines

For clients with significant BPR/APR assets or large pensions, delay is measurable in hundreds of thousands of pounds. A client with £2 million in AIM shares who acts before April 2026 preserves 100% relief. Waiting until after costs £200,000 in additional IHT. Quantify this for clients—the cost of procrastination is calculable and substantial.

Mistake 2: Gifting without retaining sufficient assets

Enthusiastic gifting can leave clients financially dependent on children or state support. The rule should be: only gift what you can genuinely afford to lose. Model multiple scenarios including long-term care costs, investment underperformance, and extended longevity before recommending substantial gifts.

Mistake 3: Not documenting gifts properly

HMRC regularly challenges undocumented PETs. Every gift requires: written confirmation, evidence of transfer, valuation (if non-cash), and records maintained for seven years minimum. Verbal gifts or poorly documented transfers become disputes for executors and beneficiaries.

Mistake 4: Ignoring reservation of benefit rules

Gifting the family home while continuing to live there rent-free means the property remains in the estate. Reservation of benefit is a technical area—any gift where the donor retains advantage fails for IHT purposes. Even informal arrangements (like access to a gifted holiday property) can trigger these rules.

Mistake 5: Assuming all business assets qualify for BPR

Investment businesses don't qualify for business property relief—only trading businesses do. A client's company managing a property portfolio or investment portfolio won't qualify, despite being a "business." This is a technical assessment requiring specialist advice for any borderline cases.

Mistake 6: Overlooking spousal exemption planning

Many married couples leave everything to each other, wasting the first spouse's nil rate band if both estates eventually pass to children. Estate equalization during lifetime ensures both partners can use their allowances. For a couple with a combined £3 million estate held 90% by one spouse, rebalancing to 50/50 can save up to £130,000 in IHT.

Mistake 7: Setting up trusts without understanding ongoing obligations

Trusts face 10-year periodic charges, exit charges when assets leave, and ongoing administration requirements. Trustees have legal duties and potential personal liability. Clients who view trusts as "set and forget" structures are creating future problems. Ongoing professional support is essential.

Mistake 8: Making gifts without life insurance through taper relief period

If the donor dies within seven years, the gift becomes partially or fully taxable. For large gifts, the potential tax bill during the taper relief period is substantial. Life insurance covering the tapering tax charge protects the gift's effectiveness. A £1 million gift made at age 68 might require £150,000 seven-year term insurance to cover potential IHT if the donor dies in years 3-7.

Mistake 9: Failing to update wills after gifting or restructuring

A will written before major gifting or business restructuring may no longer reflect the client's wishes or current asset position. Wills should be reviewed after every significant estate planning change, ensuring dispositions align with the restructured estate.

Mistake 10: Not coordinating estate plan with business succession

For business owners, estate planning and succession planning must be aligned. A family business transition that fails because estate planning and succession planning pulled in different directions is a failure of coordination. The wealth manager should ensure the client's solicitor, accountant, and business advisor are all working from the same strategy.

Each mistake has a cost—in tax, family disputes, or failed planning. Your role is to help clients avoid these pitfalls through careful, coordinated advice and by knowing when specialist input is essential.

Practical Client Conversation Framework

Raising estate planning with HNW clients requires skill. Here's a structured approach to discussing IHT mitigation without seeming morbid or pushy.

Opening the Conversation

Start with their financial goals, not their death. Try: "We've built your investment portfolio to achieve your retirement and lifestyle goals. An important part of protecting what you've built is ensuring it passes to your family as efficiently as possible. Have you reviewed your estate plan recently, particularly with the tax changes coming in 2026 and 2027?"

This frames estate planning as protection, not mortality. You're helping them achieve their goal of providing for family—death is an obstacle to overcome, not the focus.

Quantifying the Problem

Numbers make abstract concerns concrete. Show the calculation simply:

"Your estate is currently valued at approximately £4.2 million. Under current law, your heirs would pay £1.28 million in inheritance tax. However, with the pension changes in 2027 and business relief restrictions in 2026, this could increase to £1.68 million. That's an additional £400,000 that won't reach your family unless we plan proactively."

Seeing £400,000 in real terms creates urgency more effectively than discussing percentages or abstract concepts.

Presenting Options Without Overwhelming

Use a tiered approach. Present 2-3 immediate strategies before discussing complex structures:

"There are three approaches we should consider first. One, we could implement a gifting strategy using your annual exemptions and surplus income—this alone could reduce your liability by approximately £300,000 over seven years. Two, we could establish life insurance in trust to provide liquidity for the tax bill, costing about £12,000 annually but protecting £500,000. Three, we should review your pension withdrawal strategy given the 2027 changes. Would you like to explore these in detail?"

This gives clients digestible options with clear outcomes. Once they're comfortable, introduce advanced strategies.

Addressing Common Resistance

"I'm not ready to think about this"

Response: "I understand. However, the April 2026 deadline for business relief planning is fixed. Waiting doesn't make the conversation easier—it just makes the planning options more limited and expensive. We can take this step by step, starting with simple strategies that don't require significant lifestyle changes."

"I don't want to give away control"

Response: "Control and tax efficiency aren't mutually exclusive. Many strategies—like family investment companies or loan trusts—allow you to retain control while removing growth from your estate. We can design a plan that achieves both objectives."

"I need the money myself"

Response: "Absolutely, your security comes first. That's why we model every scenario including long-term care costs and investment volatility before recommending any gifts. We only plan with assets you can genuinely afford to gift—your financial independence is non-negotiable."

Creating Urgency with Deadlines

Be specific about time sensitivity: "The business property relief changes take effect on 6 April 2026. That's 18 months to implement restructuring strategies. For a potentially exempt transfer to become fully IHT-free, your client needs to survive seven years. If we wait another year to start planning, that's an additional year of exposure. Every month we delay costs your family approximately £X in preventable tax."

Example Script

"Your estate is currently valued at approximately £4.2 million. Under current law, without planning, your heirs would pay £1.28 million in inheritance tax. However, with the changes coming in 2026 and 2027, this could increase to £1.68 million—an additional £400,000.

Let me show you three strategies that could reduce this to under £800,000 while maintaining your financial security. First, a systematic gifting plan using your surplus income—£80,000 annually is immediately exempt with proper documentation. Second, repositioning your AIM portfolio before April 2026 while the full relief is available. Third, adjusting your pension withdrawal strategy before the 2027 changes.

Combined, these approaches could save your family over £800,000. The key is acting before the deadlines close these planning windows. Would you like me to model these scenarios with your specific numbers?"

Decision-Making Tools

Create simple comparison tables showing net inheritance under different scenarios:

Strategy Estate Value IHT Liability Net to Heirs Family Benefit vs. No Planning
No planning £4.2m £1.68m £2.52m Baseline
Gifting + insurance £3.5m £900k £2.6m +£80k
Full restructuring £3.2m £680k £2.52m + £500k insurance +£500k

Visual comparisons help clients see the value of planning in concrete terms.

Next Steps and Follow-Up

Transition from conversation to implementation: "Based on this discussion, I recommend we take three immediate steps. First, I'll model detailed scenarios using your specific figures. Second, I'd like to introduce you to our specialist estate planning solicitor who can advise on the trust structures. Third, let's schedule a follow-up in two weeks to review the modeling and decide on our approach. Does that timeline work for you?"

Set a clear review cadence: annually at minimum, plus after major life changes (retirement, business sale, significant inheritance, family changes). Estate planning isn't a one-time project—it requires ongoing review as values change, laws evolve, and circumstances shift.

The conversation framework makes a difficult topic approachable. Your confidence, specific numbers, and clear next steps help clients move from awareness to action.

Working with Solicitors and Tax Specialists: The Advisor's Role

HNW estate planning is inherently collaborative. Understanding where your expertise ends and specialist advice begins protects both you and your clients.

What Wealth Managers Can Do

Your role centers on financial planning and coordination:

  • Identify IHT exposure through estate valuation and tax calculations
  • Explain strategies at a high level and their potential benefits
  • Model financial scenarios showing different planning outcomes
  • Coordinate the professional team (solicitors, accountants, tax specialists)
  • Monitor implementation and recommend reviews when circumstances change

You're the strategic advisor who spots opportunities and ensures the client's overall financial plan accommodates estate planning recommendations.

What Requires Solicitors

Legal implementation must be handled by qualified solicitors:

  • Drafting wills and codicils
  • Establishing and documenting trusts
  • Preparing deeds of variation for post-death planning
  • Creating lasting powers of attorney
  • Advising on reservation of benefit and technical legal issues
  • Documenting gifts to meet HMRC requirements

Never draft legal documents yourself or give detailed advice on legal structures. A poorly drafted trust or will creates liability exposure and potential claims against your professional indemnity insurance.

What Requires Tax Specialists

Complex tax calculations and HMRC matters need chartered tax advisors or specialist accountants:

  • Detailed inheritance tax computations for complex estates
  • Cross-border tax planning and treaty interpretation
  • Business valuation for BPR purposes
  • Advising on HMRC enquiries or disputes
  • Tax return preparation for trusts and estates
  • Technical analysis of anti-avoidance provisions

For straightforward calculations (basic IHT liability on liquid estates), you can advise. For anything complex—business valuations, cross-border issues, trust taxation—refer to specialists.

Building a Professional Network

Identify and vet specialist advisors before you need them. Criteria for referral partners:

  • Recognized qualifications (STEP membership for estate planners, ICAEW for tax, Law Society accreditation)
  • Experience with HNW clients in similar circumstances to your client base
  • Clear fee structures and communication style
  • Collaborative approach—willing to work as part of a team
  • Professional indemnity insurance appropriate for the work

Develop relationships with 2-3 specialists in each category so you can match client needs with advisor expertise and style.

Coordinating the Professional Team

Best practices for multi-advisor relationships:

  • Establish clear communication channels from the outset
  • Define each professional's scope to avoid gaps or overlaps
  • Ensure the client understands who provides which service
  • Schedule joint meetings for complex planning discussions
  • Share relevant information (with client consent) so everyone works from the same facts
  • Agree on implementation timelines and who tracks each milestone

You're often the coordinator, ensuring the estate planning solicitor's recommendations align with the tax specialist's analysis and fit within the overall financial plan you're managing.

Fee Structures

Help clients understand how different advisors charge:

  • Solicitors: Often fixed fees for wills (£500-£2,000), hourly rates for trusts (£300-£500/hour) or percentage of trust value for ongoing trustee services
  • Tax specialists: Hourly rates (£200-£400) or fixed fees for specific advice
  • Your fees: May be covered under existing retainer or separate project fees for estate planning coordination

For complex restructuring involving trusts and business assets, combined professional fees of £15,000-£30,000 aren't unusual. However, for a client facing £800,000 in preventable IHT, this represents a 2-4% implementation cost for a 100% tax saving. Frame fees as an investment in tax efficiency.

Red Flags Requiring Specialist Input

Recognize situations beyond generalist wealth management:

  • Non-UK assets or clients with international residence history
  • Business valuations exceeding £5 million or complex shareholding structures
  • Families with second marriages, non-marital children, or dependents with disabilities
  • Existing trust structures (especially offshore) that require review
  • Disputes among beneficiaries or challenges to existing wills
  • Clients with tax residence in multiple jurisdictions
  • Agricultural property or trading businesses approaching the new BPR/APR caps

When you encounter these situations, don't attempt to advise beyond your expertise. The referral conversation might be: "Your situation involves [technical complexity]. While I can help you understand the broad implications and coordinate the planning, implementing this properly requires a specialist solicitor with expertise in [area]. I work with several excellent firms who focus on cases like yours. Would you like me to make an introduction?"

Professional Responsibility and Liability

Wealth managers must stay within their regulatory permissions and expertise. The FCA requires that advice is suitable for individual clients and within your competence. Straying into legal or detailed tax advice outside your qualifications creates:

  • Regulatory risk (unsuitable advice complaints)
  • Professional indemnity claims if advice proves incorrect
  • Reputational damage with clients and professional referral partners

When in doubt, refer to specialists. Clients respect advisors who know their limits and bring in experts when needed—it demonstrates professionalism, not weakness.

The collaborative model works: you identify opportunities and coordinate strategy, while specialists handle technical implementation. This division of labor protects clients, limits your liability, and ensures the highest quality advice. Your value lies in seeing the big picture, asking the right questions, and ensuring all the pieces fit together into a coherent, effective estate plan.

Key Takeaways for HNW Estate Planning

The landscape for high net worth estate planning has fundamentally shifted with the 2026 and 2027 legislative changes. Here's what wealth managers must prioritize:

Act immediately before April 2026 deadlines:

Review business property relief and agricultural property relief assets with all affected clients. The window for optimal restructuring is closing fast, and the anti-forestalling rules already apply to recent gifts. For clients with BPR/APR assets exceeding £1 million, every month of delay costs measurable tax savings.

Reassess pension strategies before April 2027:

The inclusion of pensions in IHT calculations changes retirement planning fundamentally. Model the impact of pension inclusion for every HNW client and adjust withdrawal sequencing accordingly. What was tax-efficient advice 12 months ago may be costly in the new regime.

Layer multiple strategies for maximum reduction:

No single approach solves HNW estate planning. Combine lifetime gifting, trust structures, insurance solutions, and business restructuring. A £5 million estate might use annual exemptions (£3,000), normal expenditure from income (£60,000 annually), strategic gifts with taper relief (£500,000), life insurance in trust (£400,000 coverage), and business restructuring pre-April 2026. Together, these reduce IHT from potentially £1.6 million to under £500,000.

Coordinate closely with specialist advisors:

Wealth managers identify opportunities and model scenarios, but solicitors and tax specialists must handle technical implementation. Build your referral network now—you'll need these relationships urgently over the next 18 months. The collaborative model protects your clients and limits your professional liability.

Review estate plans at least annually:

Tax law evolves, asset values change, and family circumstances shift. Estate planning requires ongoing attention, not one-time implementation. Schedule annual reviews, plus ad-hoc reviews after significant events (business sale, inheritance, divorce, retirement). The £800,000 in tax savings you implement today could evaporate through neglect if not actively maintained.

The conversations you have with HNW clients over the next 12-18 months about estate planning could determine whether their heirs receive millions more—or millions less—in inheritance. For many families, the difference between proactive planning and inaction is the difference between preserving a legacy and watching a lifetime of wealth-building eroded by avoidable taxes.

Your clients built their wealth through smart decisions. Ensuring it passes efficiently to the next generation is one of the smartest decisions they'll ever make—and you're the professional who can guide them there.

Start With the Foundation: Professional Will Services for Your Clients

While complex HNW estates require specialist legal and tax advice, many of your clients also need a straightforward, legally valid will as the foundation of their estate plan. WUHLD provides a professional online will service that your clients can complete in just 15 minutes for £99.99 (versus £650+ from solicitors).

For clients with straightforward asset distributions—even high earners with uncomplicated wishes—WUHLD offers a time-efficient, cost-effective starting point. They receive:

  • Their complete, legally binding will
  • A 12-page Testator Guide explaining execution requirements
  • A Witness Guide for proper signing procedures
  • A Complete Asset Inventory document

Clients can preview their entire will free before paying anything—no credit card required. While you focus your advisory relationship on the high-value tax planning and complex structuring that truly requires your expertise, your clients can have their foundational will in place within the hour.

For straightforward wills, recommend WUHLD as a professional solution your clients can trust. Complex estates with trusts, business assets, or cross-border complications still need specialist solicitors—but for many of your clients, getting a basic will in place is the essential first step before tackling sophisticated planning.

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Frequently Asked Questions

What counts as high net worth for UK inheritance tax planning purposes?

While HMRC technically defines ultra-high net worth as estates over £20 million, most wealth managers focus on clients with estates exceeding £2 million as this is the critical threshold where inheritance tax planning becomes essential. At £2 million for individuals (£2.35 million for married couples), the Residence Nil-Rate Band begins to taper away completely, meaning you lose the additional £175,000 allowance for leaving your main home to direct descendants.

This creates a squeeze point where estates valued between £2 million and £5 million face disproportionately high effective tax rates. With only £325,000 standard nil-rate band remaining after RNRB elimination, a £3 million estate could face over £1 million in inheritance tax without proper planning. The frozen thresholds until 2030 combined with property price growth mean more estates cross this £2 million threshold annually through fiscal drag rather than intentional wealth accumulation.

How do the April 2026 Business Property Relief changes affect high net worth estates?

From 6 April 2026, Business Property Relief and Agricultural Property Relief will be capped at a combined £1 million qualifying for 100% relief. Assets above this threshold receive only 50% relief, creating an effective 20% inheritance tax rate on the excess. This fundamentally changes planning for clients holding AIM shares, unlisted company shares, trading businesses, or agricultural land.

Previously, a client with £3 million in qualifying AIM shares paid zero inheritance tax due to 100% BPR. From 2026, only the first £1 million receives full relief while the remaining £2 million gets 50% relief, leaving £1 million exposed to 40% tax—a £400,000 liability that didn't exist before. Critical urgency exists because anti-forestalling rules already apply to gifts made between 30 October 2024 and 5 April 2026 if the donor dies after 6 April 2026.

Wealth managers must review all clients with BPR-qualifying assets immediately, quantify exposure above the £1 million cap, and evaluate accelerated gifting or portfolio restructuring before the deadline. The £1 million allowance is shared between BPR and APR, so clients with both types of assets share a single cap.

What happens to pensions in estates from April 2027 and how does this affect withdrawal strategies?

From 6 April 2027, unused pension funds and death benefits will be included in estate values for inheritance tax purposes, closing what the government calls a loophole from lifetime allowance abolition. This affects approximately 10,500 estates annually and is projected to raise £1.5 billion by 2029-30.

The impact is substantial: a £1 million pension that previously passed IHT-free now creates a £400,000 tax liability at 40%. For clients dying after age 75, beneficiaries face potential double taxation—40% IHT plus income tax at marginal rates on withdrawals, combining to as much as 67% total taxation.

This completely reverses conventional withdrawal sequencing advice. Previously, advisors recommended preserving pensions and spending other assets first. From April 2027, many clients should reconsider this strategy. For financially secure clients with substantial pension pots, accessing pensions before death and gifting proceeds or using funds for life insurance in trust may be more tax-efficient than leaving pensions subject to 40% IHT. Personal representatives (not pension administrators) will be liable for reporting and paying IHT on pension assets, creating additional administrative complexity.

What is normal expenditure out of income relief and why is it the most overlooked strategy for HNW clients?

Normal expenditure out of income is arguably the most powerful but underutilized inheritance tax relief for high net worth clients. Gifts made regularly from income (not capital) that don't reduce the donor's standard of living are immediately exempt from inheritance tax with no monetary limit and no seven-year waiting period.

For a client with £200,000 annual income living comfortably on £120,000, regular gifts of £80,000 annually qualify for immediate exemption. Over 10 years, that removes £800,000 from the estate with no survival requirement, unlike potentially exempt transfers which require seven years to become fully exempt.

The key requirements are: gifts must be made from income not capital, they must be part of normal expenditure establishing a regular pattern, and they must not reduce the donor's standard of living. Proper documentation is essential—maintain detailed records showing income received, living expenses, and the regular gifting pattern. Many wealth managers overlook this relief because it requires consistent record-keeping and cannot be implemented retrospectively. However, for clients with substantial investment income, pension income, or dividend income exceeding lifestyle needs, this relief offers immediate, unlimited IHT reduction without the uncertainty of potentially exempt transfers.

How does the residence-based taxation system affect non-UK domiciled clients from April 2025?

The UK shifted from domicile-based to residence-based taxation from April 2025, fundamentally changing planning for international clients and non-doms. Clients who are UK resident for 10 out of the last 20 years now face worldwide inheritance tax liability on their entire estate, not just UK assets.

This 10-year threshold creates critical planning urgency for international clients. Excluded property trusts must be established before reaching the 10-year residence threshold to shelter non-UK assets from UK IHT entirely. Once the threshold is breached, the opportunity to use excluded property trusts for existing wealth is lost. For clients approaching year 8 or 9 of UK residence, immediate action is essential.

The residence test counts any tax year where you were UK resident for any part of the year, so careful day-counting and strategic timing of arrivals and departures can extend the planning window. Non-UK domiciled spouses previously had unlimited IHT-free transfers from UK-domiciled spouses; this is now limited to £325,000 (the nil-rate band). International couples require specialist cross-border advice to optimize structures balancing UK IHT, overseas tax obligations, and treaty provisions. This is sophisticated planning requiring coordination between UK and overseas advisors.

What is the strategic charitable giving relief and how does the 36% reduced rate work?

Estates giving 10% or more of their net estate to qualifying UK charities benefit from a reduced inheritance tax rate of 36% instead of the standard 40% rate. The mathematics is genuinely tax-efficient because the 4% rate reduction applies to the entire taxable estate, not just the non-charitable portion.

For a £5 million estate with £2 million taxable after allowances, giving £500,000 to charity saves the estate £60,000 in inheritance tax while supporting causes the client values. Here's the calculation: without charitable giving, IHT is £2 million × 40% = £800,000, leaving £4.2 million for heirs. With £500,000 to charity (25% of the £2 million taxable estate, well over the 10% requirement), the taxable estate reduces to £1.5 million taxed at 36% = £540,000 IHT, leaving £3.96 million plus the £500,000 already given makes £4.46 million total value delivered.

Net benefit to heirs is £260,000 greater despite £500,000 going to charity. The 10% baseline is calculated on the net estate after deducting liabilities, exemptions, and reliefs, and can be calculated across the whole estate or component by component for clients with complex asset structures. This relief works particularly well for clients with strong philanthropic intentions who were planning charitable gifts anyway.

How do family investment companies work for high net worth estate planning?

Family Investment Companies (FICs) are sophisticated structures allowing clients to retain control while transferring economic value to family members tax-efficiently. Parents typically hold fixed-rate preference shares providing a steady income stream while children hold ordinary shares capturing all future growth.

The structure works by parents gifting ordinary shares to children (or settling them into trust), creating an immediate potentially exempt transfer for IHT purposes. The gift value is discounted because the preference shares retain rights to income, reducing the actuarial value transferred. All future investment growth accrues to the ordinary shares held by children or trusts, immediately outside the parents' estate. Parents maintain control as directors, making all investment decisions regardless of shareholding structure.

The company pays corporation tax at 19-25% on investment income and gains (lower than higher-rate personal tax), and parents receive tax-efficient income through preference share dividends. FICs offer asset protection benefits—company assets are protected from beneficiaries' divorces or creditor claims. Setup costs are substantial (£5,000-£15,000 for professional advice and structuring) with ongoing compliance costs (annual accounts, corporation tax returns, dividend administration). FICs work best for estates over £5 million with substantial investment portfolios and family members who can work collaboratively under parental control for many years.

What are pilot trusts and how do they preserve nil-rate bands for future planning?

Pilot trusts are small trusts established with modest amounts (often just £10) primarily to preserve the settler's nil-rate band for future use rather than to transfer significant value immediately. The strategy works by creating multiple pilot trusts—typically up to 10-15 separate trusts, each established with a nominal settlement.

Each trust has its own nil-rate band for trust tax purposes, meaning up to £325,000 can be added to each trust within seven years without triggering immediate inheritance tax charges. This allows substantial future flexibility: clients can add assets to these trusts later when circumstances make it appropriate, using the preserved nil-rate bands.

For example, a client establishes five pilot trusts in 2025 with £10 each. In 2030, after receiving a large inheritance or selling a business, they can add £325,000 to each trust (£1.625 million total) without immediate IHT charges because each trust has a full nil-rate band. Pilot trusts require professional legal drafting to ensure proper structure and avoid HMRC challenges. The Finance Act 2006 rules on related settlements mean trusts established on the same day by the same settlor share a single nil-rate band, so trusts must be established on different days. This is highly technical planning requiring specialist legal advice, but offers unmatched flexibility for clients with uncertain future circumstances.

What are the most critical mistakes wealth managers must help clients avoid before the 2026 and 2027 deadlines?

The costliest mistake is failing to act before April 2026 for clients with BPR-qualifying assets exceeding £1 million—every month of delay represents measurable six-figure costs. A client with £2 million in AIM shares who waits until after April 2026 loses £200,000 in tax savings that restructuring before the deadline would preserve.

Second, gifting without retaining sufficient assets leaves clients financially dependent on children or requiring state support; model multiple scenarios including care costs and extended longevity before recommending substantial gifts. Third, not documenting gifts properly means HMRC challenges that executors must defend years later; every gift requires written confirmation, evidence of transfer, professional valuation if non-cash, and records maintained seven years minimum.

Fourth, ignoring reservation of benefit rules—gifting the family home while living there rent-free means it remains in the estate; even informal arrangements like access to gifted holiday properties can trigger these rules. Fifth, assuming all business assets qualify for BPR when investment businesses managing property or investment portfolios don't qualify despite being a business. Sixth, setting up trusts without understanding ongoing obligations—10-year periodic charges, exit charges, trustee duties, and potential personal liability require ongoing professional support, not set-and-forget structures. Seventh, making large gifts without life insurance during the seven-year taper period exposes the gift's effectiveness to survival risk; term insurance covering the tapering liability protects the planning.

When should wealth managers refer clients to specialist solicitors versus handling estate planning in-house?

Wealth managers should identify opportunities, model scenarios, and coordinate strategy, but legal implementation requires qualified solicitors for specific situations. Wealth managers can handle estate valuation, basic IHT calculations, explaining strategies at high level, modeling different planning outcomes, and monitoring implementation with annual reviews.

However, you must refer to solicitors for drafting wills and codicils, establishing and documenting trusts, preparing deeds of variation, creating lasting powers of attorney, advising on reservation of benefit and technical legal issues, and documenting gifts to meet HMRC requirements. Red flags requiring immediate specialist referral include non-UK assets or international residence history, business valuations over £5 million or complex shareholdings, families with second marriages or dependents with disabilities, existing offshore trust structures requiring review, disputes among beneficiaries or will challenges, tax residence in multiple jurisdictions, and agricultural property or trading businesses approaching the new £1 million BPR cap.

For straightforward calculations on liquid estates, wealth managers can advise, but anything involving cross-border issues, business valuations, or trust taxation requires chartered tax advisors or specialist accountants. The collaborative model protects clients and limits professional liability—you're the strategic advisor spotting opportunities while specialists handle technical implementation. Never draft legal documents yourself or give detailed legal structure advice as poorly drafted trusts or wills create PI insurance claims and potential regulatory action. Build your referral network before you need it, identifying STEP-qualified estate planners and ICAEW tax specialists who work collaboratively with wealth managers.

How should property-rich, cash-poor high net worth clients structure their estates to avoid forced sales?

Property-rich estates create the challenging combination of high IHT liability with insufficient liquid assets to pay it, risking forced property sales at distressed prices. A £3 million estate comprising a £2.5 million home with £500,000 other assets faces approximately £700,000 IHT but has only £500,000 available—£200,000 short.

Solutions include whole-of-life insurance written in trust providing funds to pay IHT without increasing estate value; for a £700,000 policy, annual premiums might be £8,000-£12,000 for a healthy 65-year-old, totaling £240,000 over 20 years versus £700,000 tax covered. Downsizing with strategic gifting—moving from a £2 million home to £1 million property releases £1 million for gifting while RNRB downsizing provisions preserve the residence nil-rate band if proceeds are gifted to direct descendants.

Equity release provides liquidity for gifts without moving; the loan reduces estate value while gifted proceeds start the seven-year PET clock, though equity release interest rates typically exceed standard mortgages requiring careful modeling. Property in trust triggers immediate 20% IHT on value above nil-rate band but removes all future growth; for a £2 million property appreciating 4% annually, growth over 15 years is £800,000, making an immediate £270,000 charge worthwhile to shelter future growth. As a last resort, HMRC allows IHT on property paid in 10 annual installments, but interest accrues and property cannot be sold without settling full liability—this is a fallback, not a strategy.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

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