Estate Planning Tips: 17 Ways to Secure Assets & Cut UK Tax

Estate planning can feel like an admin chore you put off until ‘someday’, yet every year HMRC collects millions from families who assumed their affairs were simple. By following the 17 practical tips below, you can ring-fence hard-earned savings, cut Inheritance Tax under the 2025/26 rules and spare loved ones months of paperwork. Whether your estate is worth £100,000 or £10 million, the same allowances and legal tools apply—getting them wrong could still cost thousands.

Written specifically for UK residents, this guide blends straightforward explanations with advanced tactics: wills, pension wrappers, Business Relief investments, life-insurance trusts, and more. We debunk the myth that estate planning is only for the super-wealthy and show how even modest homes can breach the tax threshold. Expect bite-sized checklists, real numbers, and plain English you can act on immediately or discuss with your solicitor or financial planner. Read on and start protecting your family’s future today.

1. Make a Legally Binding Will

Think of a will as the instruction manual for your estate: without it, the state decides who gets what, when, and after how much red tape. A rock-solid document costs little, yet it underpins every other estate planning tip in this guide.

Why a Will Is the Cornerstone of Your Plan

• Intestacy rules could pass assets to distant relatives, bypassing partners or step-children.
• Probate drags on and legal fees rise when executors must untangle guesswork.
• Clear wishes reduce family disputes and stop HMRC charging interest on late IHT payments.

Step-by-Step Drafting Checklist

1. List all UK and overseas assets, plus digital accounts.
2. Name trustworthy executors (ideally two).
3. Appoint guardians for minors.
4. Detail specific gifts, then the “residue”.
5. Note funeral preferences.
6. Sign before two independent witnesses.
7. Store the original safely and record its location.

Common Pitfalls to Avoid

• Letting an old will linger after marriage or divorce.
• Witnesses who are beneficiaries (invalid).
• Accidentally revoking the will by writing “updates” on the original.
• Forgetting to include wording for foreign property.

2. Set Up Trusts to Control and Protect Wealth

A trust is a legal wrapper that lets you hand assets to chosen people without giving them free rein straight away. Used well, trusts stop teenage beneficiaries blowing an inheritance, shield money from divorce claims and keep growth outside your taxable estate. They are one of the most flexible estate planning tips, yet need precise drafting.

Trust Options for UK Families

• Bare trust – child owns outright at 18; simple, no ongoing tax charges.
• Discretionary trust – trustees decide who benefits and when; good for complex families.
• Life-interest (interest-in-possession) – income to one person, capital to others later.
• Vulnerable-person trust – preferential tax rates where a disabled beneficiary qualifies.
• Pilot trust – set up now with £10, then receive pension or life-policy pay-outs later.

Tax Advantages and Caveats

• Gifts into most trusts leave your estate after seven years, potentially saving 40% IHT.
• Chargeable lifetime transfers over £325,000 suffer a flat 20% entry charge.
• Discretionary trusts face a maximum 6% ten-year and exit charge; on £500,000, that’s £30,000 each decade.
• Hold-over relief can defer Capital Gains Tax when you gift business assets into the trust.

Choosing Trustees & Drafting Provisions

Pick at least two trustees who are financially savvy and likely to outlive you—mixing a family member with a professional strikes balance. Add a non-binding letter of wishes to guide decisions, and name reserve trustees so control never lapses.

3. Use Your Annual £3,000 Gift Exemption

Small, regular gifts are the low-hanging fruit of estate planning. HMRC lets every adult give away up to £3,000 each tax year free of Inheritance Tax (IHT). If you didn’t use last year’s allowance, you can roll it forward once—meaning a couple could shift £12,000 out of their joint estate today.

How the Annual Exemption Works

• Applies per donor, not per recipient.
• Gifts are immediately outside the estate; no 7-year clock.
• Carry-forward must be used before the current year’s allowance.

Practical Ways to Use It

• Fund a child’s Junior ISA or LISA each April.
• Pay one-off university accommodation fees.
• Set up a standing order to a grandchild’s savings account.
• Top up a partner’s stocks & shares ISA just before the tax-year end.

4. Start 7-Year Potentially Exempt Transfers Early

Big gifts – cash, property, shares – are classed as Potentially Exempt Transfers (PETs). They drop out of your estate only if you live seven years, so starting the clock now rather than “one day” can claw back tens of thousands in future IHT. Each PET has its own timer, letting you sequence gifts in bite-sized chunks and still keep enough capital for your own retirement.

The 7-Year Clock Explained

• Years 0-3: die and HMRC charges 40 % on the gift.
• 3-4: 32 %
• 4-5: 24 %
• 5-6: 16 %
• 6-7: 8 %
• 7+ years: 0 %

Taper relief reduces, not removes, tax; the gift still uses your £325k nil-rate band first.

Examples of Early-Action Gifting

Gift £250,000 to your daughter at age 60 and live past 67: saving = £100,000 IHT. Wait until 75 and die at 80: only five years pass, taper falls to 16 %, leaving a £40,000 bill for the same gift.

5. Give From Income Under the “Normal Expenditure” Rule

Here’s a loophole that doesn’t rely on seven-year survival: if a gift comes from your regular, surplus income and is genuinely part of your normal spending pattern, it escapes Inheritance Tax immediately. Used smartly, this exemption can move thousands out of your estate every year without eating into other allowances.

Qualifying Criteria HMRC Looks For

• Gift must be made from post-tax income, not capital
• It should form part of a settled, regular pattern
• Giving must leave you enough to maintain your usual lifestyle

Meet all three and the amount, frequency and recipient are up to you—season-ticket fees for a grandchild or monthly rent support both qualify.

Recording & Evidence Tips

• Keep a spreadsheet noting date, recipient and purpose
• File matching bank statements or standing-order confirmations
• Add a short covering note to your annual tax file
• Executors should reference these records in form IHT403
  Accurate paperwork is the difference between a tax-free gift and a 40 % HMRC challenge.

6. Maximise Nil-Rate Band Transfers Between Spouses

Married couples and civil partners have a built-in, HMRC-approved way to double the amount that can pass free of Inheritance Tax. Make sure you harvest every pound of the nil-rate band (NRB) on the first death, so the survivor’s estate can shelter up to £650,000 before IHT bites—an easy win among these estate planning tips.

Nil-Rate Band Basics

• Each individual enjoys a £325,000 NRB.
• Any unused slice is preserved as a percentage, not a cash figure.
• On second death the percentage is added to the then-current NRB, protecting assets from the 40 % charge.
• The transfer is separate from the residence nil-rate band.

When & How to Claim Transfer

Executors of the second estate complete HMRC form IHT402—ideally within 12 months of probate, though up to two years is allowed. Example: First spouse leaves only £130,000 to non-exempt beneficiaries. £195,000 (£325k – £130k) or 60 % of the NRB remains. On second death, 60 % is added to the prevailing £325,000, giving a £520,000 shield. Keep copies of the first death’s grant of probate and IHT return; they are the evidence HMRC requires.

7. Secure the Residence Nil-Rate Band for Your Home

Your main residence can shelter an extra £175,000 from Inheritance Tax, but only if you tick the right boxes before death. Miss the rules and the allowance is lost forever, leaving your family to foot a 40 % bill on the value of a house you’ve already paid for once.

Eligibility Rules

• Applies in addition to the £325k nil-rate band, giving a potential £500k shield per person.
• Property (or its sale proceeds) must pass to “direct descendants” — children, step-children, adopted or fostered.
• The allowance tapers by £1 for every £2 your estate exceeds £2 million; lose it entirely above £2.35 million.
• Downsizing? Sell or move and the relief can still apply, provided detailed records link the sale to the eventual gift.

Planning Ideas to Qualify

• Leave the family home outright to children rather than to a discretionary trust.
• Gift a share of the property to your spouse now, doubling the residence band on second death.
• If approaching the £2 million taper, make lifetime gifts or transfer AIM/BPR assets to cut the estate value below the cliff edge.
• Convert joint tenancy to tenants-in-common and draft wills to maximise both residence bands while safeguarding each partner’s share.

8. Put Life Insurance Policies Into Trust

A simple deed can turn an everyday life policy into one of the smartest estate planning tips, giving heirs an instant, tax-free cash pot exactly when they need it.

Why Holding Policies in Trust Beats Probate

• Proceeds sit outside your estate, so no 40 % IHT.
• Trustees can access funds within days, instead of waiting months for probate—ideal for funeral costs or an initial IHT bill.
• Money bypasses the will, shielding it from creditors, remarriage claims, or challenged legacies.

Setting Up the Trust Correctly

• Use the insurer’s free trust form; choose a discretionary or split-trust if critical-illness is included.
• Appoint at least two trustees—often a spouse plus a financially savvy friend.
• Complete a fresh expression-of-wish whenever life events change to keep the payout aligned with your wider plan.

9. Leverage Pensions as Inheritance-Tax-Efficient Wrappers

Few estate planning tips beat the pension wrapper. Because most UK schemes are held in trust, the fund is normally outside your taxable estate and can be redirected to loved ones within days, not months.

Pensions and IHT

• Death before age 75: beneficiaries can withdraw the entire pot tax-free.
• Death after 75: withdrawals are taxed at the recipient’s marginal income-tax rate, still 0 % IHT.
• No seven-year clocks or probate delays; simply file an expression-of-wish form and keep it updated whenever circumstances change.

Strategies: Drawdown vs Annuity

Adopt a “pension-last” mindset: spend ISAs and taxable investments first, leaving the untouched pension to grow outside IHT. Opt for flexible drawdown, not an annuity, so any remaining balance can cascade through generations rather than die with you.

10. Invest in Business Relief-Qualifying Assets

If you are comfortable with equity risk, Business Relief (BR) turns growth capital into an Inheritance-Tax shelter after only two years—much faster than the seven-year gifting clock. Used alongside the other estate planning tips, BR can ring-fence sizeable sums without giving up control of the money during your lifetime.

How Business Relief Works

• Hold qualifying shares in an unquoted or AIM-listed trading company for 24 months.
• On death, HMRC grants 100 % IHT relief (50 % for certain asset-rich businesses).
• Example: £300,000 invested in an AIM trading firm, death after 25 months → £300,000 × 40 % = £120,000 IHT saved.
• Spouse inherits the shares and the two-year clock is deemed satisfied, so the relief continues.

Investment Routes

• Direct stakes in your own or family trading company.
• Specialist AIM IHT portfolios managed by discretionary firms.
• Tax-efficient funds such as EIS or Seed EIS (offer BR plus income-tax perks).
  Whichever route you pick, scrutinise liquidity, diversification, charges and the business’s trading status—HMRC will, too.

11. Use AIM IHT Portfolios for Listed Options

Fancy listed shares that still qualify for Business Relief? An AIM IHT portfolio provides daily liquidity yet removes 40 % IHT after just two years—useful for investors wanting flexibility alongside the other estate planning tips.

AIM vs Private Business

Unlike unquoted holdings, AIM stocks trade on the London Stock Exchange, so you can buy or sell in minutes; the flip side is higher volatility and less reliable dividends.

Due-Diligence Checklist

• Diversify; no position above 5 % of pot
• Check two-year qualification date for each share
• Pick managers with proven AIM track record
• Keep total fees below 2 % annually

12. Consider a Family Investment Company (FIC)

When outright gifting feels too final ‒ yet you still want growth to fall outside your estate ‒ a Family Investment Company can be the Goldilocks option. You keep the steering wheel, the next generation enjoys the upside, and HMRC is limited to corporation-tax rules rather than 40 % IHT.

What an FIC Is & How It’s Structured

• Parents lend or subscribe for voting “A” shares and sit on the board.
• Children receive non-voting “B” growth shares, often for £1 each.
• Capital is injected as a directors’ loan; withdrawals later repay the loan tax-free.
• The company simply invests ‒ property, equities, AIM portfolios ‒ no trading required.

Tax and Control Benefits

• Profits pay just 19 – 25 % corporation tax (rates for 2025/26), leaving more to reinvest.
• Parents draw dividends on voting shares or charge interest on the loan for income.
• Growth accrues to the children’s shares, so future IHT is slashed without seven-year clocks.
• Alphabet share classes let you freeze your own value, add new heirs, or strip voting rights if kids go off-piste.

13. Leave 10% of Estate to Charity to Cut IHT to 36%

A modest act of generosity can slice your estate’s IHT rate to 36 %. Give at least 10 % of the ‘net estate’ to a UK-registered charity and the lower rate applies to everything else.

The Reduced-Rate Rule Explained

The ‘baseline amount’ is what’s left after deducting debts, reliefs and nil-rate bands. Multiply that figure by 10 %. Meet or beat it and the remaining estate is taxed at only 36 %.

Structuring Charitable Legacies

Use a residuary percentage clause—it flexes with estate value—or a fixed sum. Gift-aid donations while alive to shrink the estate further.

14. Plan Ahead for Long-Term Care Fees

Few things can unravel carefully crafted estate planning tips faster than an unexpected four-year stint in a care home. Thinking about funding options early keeps more of your wealth for children and grandchildren rather than the local authority.

Why Care Fees Matter to Estate Value

• Average residential care now tops £47,000 a year; nursing care pushes that beyond £68,000.
• England’s means-test bites once liquid assets exceed £23,250 (£50,000 in Wales; £32,750 in Scotland).
• Your main home is usually ignored while a spouse or dependent lives there, but counted once it is vacant—shrinking the inheritance in months.

Mitigation Tactics

• Immediate-needs annuity: a single premium buys a lifelong care-fee income, capping exposure.
• Property-protection trust: switch to tenants-in-common and place each half into a trust, ring-fencing the survivor’s share.
• Deferred-payment agreement: the council pays fees now and recovers them from the estate later, avoiding a forced home sale.

15. Put Lasting Powers of Attorney in Place

Should you lose mental capacity, no will or trust can authorise day-to-day decisions; only a registered Lasting Power of Attorney (LPA) keeps banks open and doctors clear about your wishes.

Types of LPA

• Property & Financial Affairs – pays bills, manages investments, sells a home.
• Health & Welfare – covers treatment choices, care-home moves, life-sustaining interventions.
  Both must be registered with the Office of the Public Guardian before they can be used.

Choosing Attorneys & Safeguards

Pick people you trust implicitly—ideally two, appointed joint-and-several. Name replacements, set authority limits in the form, and require attorneys to keep yearly accounts.

16. Keep Beneficiary Nominations Up to Date

Some assets bypass your will altogether because the provider pays whoever is named on a nomination form. Brilliant—unless the name is an ex-partner or a forgotten sibling. Spending five minutes checking these forms prevents expensive disputes and accidental windfalls.

Accounts That Bypass the Will

• Workplace or personal pension schemes
• Death-in-service benefits
• Life policies already in trust
• Sharesave or SIP schemes

Life Events Checklist

• Marriage or civil partnership
• Divorce or separation
• Birth or adoption of a child
• House move
• Job change/new pension provider
• Serious illness or inheritance

17. Review and Refresh Your Estate Plan Regularly

An airtight will today can be useless tomorrow after a new baby, Budget or stock-market windfall. Build a check-up habit so these estate planning tips keep pace with your life and with HMRC’s rulebook.

When to Revisit the Plan

Aim for a full MOT every 3–5 years, and sooner if:

• Marriage, divorce or cohabitation
• Birth/adoption of a child
• Property or business sale
• Budget or tax rule changes
• Estate value tops £2m

Simple Updating Process

Use codicils for tweaks, rewrite documents for big shifts, and store signed versions together securely.

Key Takeaways & Next Steps

Combining allowances, exemptions and wrappers multiplies the benefit—use the £3,000 annual gift, sweep surplus income to loved ones, keep pensions outside your estate and the balance of your nil-rate bands intact. Layer on Business Relief or a life-policy trust and the 40 % IHT bite can all but vanish. Yet the plan only works if every piece is current: nominations, LPAs, wills, trust deeds and care-fee provisions must be reviewed at each life change and at least every five years.

Estate planning is holistic. Financial documents, asset registers and even funeral wishes should talk to one another so executors aren’t left guessing. Tick the paperwork off now and your family inherits assets, not admin.

Ready to cross the funeral element off the list? Explore the straightforward, low-cost direct cremation options from Go Direct Cremations and give your estate plan the finishing touch.