Client profile

Mr and Mrs Smith are both in their early 70s, retired, and living comfortably in their family home in Surrey. Their combined estate, including property, savings, and investments, is estimated at £1.2 million. They want to ensure their three children inherit as much as possible while reducing the inheritance tax (IHT) liability on their estate. Like many families, the Smiths had little understanding of how IHT rules could significantly impact what they leave behind.

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The challenge: protecting wealth from inheritance tax

Without careful planning, estates above the current £325,000 nil-rate band are subject to 40% inheritance tax on amounts above that threshold. Even with additional allowances like the main residence nil-rate band, the Smiths faced a potential IHT bill of around £200,000, which would substantially reduce what their children ultimately receive.

Their goal was simple:

• Minimise the IHT payable on their estate

• Ensure their children inherited the family home and investments efficiently

• Retain flexibility for their own spending and lifestyle in retirement

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The solution: targeted IHT planning strategies

Our team worked with the Smiths to develop a personalised IHT plan using a combination of strategies:

1. Gifting during their lifetime – By making annual gifts to their children and grandchildren within the £3,000 yearly exemption and small regular gifts, the Smiths reduced the taxable value of their estate gradually without affecting their lifestyle.

2. Using trusts – Assets placed in carefully structured trusts can fall outside the estate for IHT purposes, while still providing benefits to the family over time.

3. Maximising allowances – We reviewed their estate to ensure full use of the nil-rate bands, the residence nil-rate band, and any unused allowances from a surviving spouse.

4. Investment planning – Certain investments qualify for business relief, reducing their IHT liability further. By restructuring part of their portfolio, we protected future growth from the tax charge.

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The outcome: substantial tax savings and peace of mind

Through proactive IHT planning, the Smiths were able to:

• Reduce potential IHT liability by approximately £150,000

• Protect the family home for their children

• Maintain financial flexibility in retirement

• Feel confident their estate will be distributed according to their wishes

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By acting early, the Smiths avoided the common trap of waiting too long, which often leaves families facing large, unavoidable IHT bills.

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Why it matters

Inheritance tax can significantly erode family wealth if left unplanned. With the right guidance, families can use exemptions, trusts, and lifetime gifts to reduce their tax exposure, preserve more for the next generation, and plan for a smoother transition of assets.

Even small changes, implemented early, can save tens or hundreds of thousands of pounds.

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Next steps: protect your estate today

If you’re approaching retirement or managing a sizable estate, it’s worth reviewing your IHT position now. Our advisers can help you understand your allowances, explore planning strategies, and ensure your wealth is passed on in the way you intend—while reducing the tax burden on your loved ones.

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