Your home has increased in value. You’ve built up pensions throughout your career. Perhaps you have savings, investments or a share in a business. But have you considered what all those assets could mean for your family's inheritance?
Many people assume Inheritance Tax (IHT) is something only the very wealthy need to worry about. Yet a combination of property, pensions and other assets could bring more families within its scope - particularly as changes to the treatment of inherited pensions are approaching.
And there is another potential problem. If your estate exceeds £2 million, your family could begin losing a valuable tax allowance worth up to £350,000 for married couples or civil partners.
Understanding what your estate is worth, and planning ahead, could make a significant difference to what your loved ones eventually inherit.
How much is your estate really worth?
When thinking about their wealth, many people start with the value of their home and the money in their bank accounts.
But an estate can include considerably more, including:
The value of these assets can change significantly over time. A property purchased decades ago may now be worth substantially more, while pensions accumulated across several jobs could represent a considerable sum.
If you haven't reviewed your estate planning recently, you may be surprised by the total.
Have you lost touch with a pension?
Changing jobs often means joining a new pension scheme. Over a working lifetime, it's easy to accumulate several pension pots - and just as easy to lose track of them.
And some may have grown considerably without you realising.
This matters, because from 6th April 2027, most unused pension funds and pension death benefits will be included in a person's estate for Inheritance Tax purposes.
Previously, many pension arrangements could pass outside the estate for IHT purposes. The new rules mean that pension wealth could push an estate above the tax-free thresholds or increase an existing IHT liability.
Certain benefits, including qualifying death-in-service benefits, will remain outside the scope of these changes.
If you're approaching retirement, have substantial pension savings or have worked for several employers, now is a sensible time to establish exactly what you have.
You should also review your pension beneficiary nominations to ensure they reflect your wishes. However, a nomination alone will not necessarily prevent pension funds from being included in your estate for IHT purposes under the new rules.
Could your family lose a £350,000 Inheritance Tax allowance?
One of the most easily overlooked aspects of IHT planning is the Residence Nil-Rate Band (RNRB).
The standard Inheritance Tax nil-rate band is currently £325,000 per person.
An additional allowance of up to £175,000 may be available when a qualifying home is left to direct descendants, such as children or grandchildren.
For married couples and civil partners, unused allowances can potentially be transferred to the surviving partner. This means a qualifying estate may benefit from:
However, the full £1 million is not automatically available to every couple.
Crucially, the residence nil-rate band begins to reduce when an individual's estate exceeds £2 million. For every £2 above that threshold, £1 of the available residence nil-rate band is lost.
For example, if the surviving spouse's estate is worth £2.2 million, the available residence nil-rate band could be reduced by £100,000.
At the standard 40% IHT rate, that reduction could potentially mean an additional £40,000 in tax.
Where a surviving spouse's estate is entitled to the full combined £350,000 residence nil-rate band, it can be lost entirely once the estate reaches £2.7 million.
This is why understanding the total value of your estate - and how the allowances work - is so important.
Could your pension push you over the £2 million threshold?
Think of a homeowner whose property, savings and investments are already worth £1.8 million.
If they also have £500,000 in unused pension funds that become included in their estate under the rules from April 2027, their estate could rise to £2.3 million.
That could have two consequences.
First, more of their wealth may become liable for IHT.
Second, exceeding the £2 million threshold could reduce their residence nil-rate band, potentially creating a further tax liability.
Of course, the actual outcome depends on the person's circumstances, available exemptions, debts, reliefs and how assets pass on death.
But it demonstrates why pensions and property should no longer be considered separately when reviewing estate planning.
Seven ways to review your Inheritance Tax position
Effective IHT planning is about more than reducing a tax bill. It's about protecting your family's financial future, while ensuring you retain the assets and income you need during your lifetime.
There are several areas worth considering:
1. Review your Will
An up-to-date Will helps ensure your estate passes according to your wishes and allows you to consider how available tax allowances and exemptions may apply.
Changes in property ownership, marriage, divorce, children or grandchildren can all affect your estate planning needs.
2. Consider whether a trust is appropriate
Trusts can be useful for controlling how assets are passed on and, in some circumstances, supporting tax-efficient estate planning.
However, trusts have their own tax rules and can sometimes affect eligibility for the residence nil-rate band. They should be established with specialist advice rather than treated as an automatic IHT solution.
3. Explore lifetime gifting
Giving assets away during your lifetime may help reduce the value of your estate.
Some gifts are immediately exempt, while others may fall outside your estate if you survive for seven years.
There are also exemptions for certain regular gifts made from surplus income.
The rules can be complex, particularly if you continue to benefit from an asset after giving it away.
4. Review your pensions
Locate any pensions you may have lost track of, establish their current values and check your beneficiary nominations.
The changes coming in April 2027 make it especially important to consider pensions as part of your wider estate planning.
Decisions about pension withdrawals or passing on pension wealth should also take account of retirement income needs and potential Income Tax consequences, ideally with coordinated legal and regulated financial advice.
5. Check your property arrangements
Buying, selling, downsizing or transferring property can affect your estate's value and the allowances available.
If your estate is approaching £2 million, understanding the potential effect on the residence nil-rate band is particularly important.
6. Review business interests
Business owners may qualify for Business Relief on certain assets.
However, changes introduced from April 2026 mean the amount qualifying for 100% Business Relief is subject to a £2.5 million combined allowance for qualifying business and agricultural property, with different rules applying above that level and to certain shareholdings.
Business succession planning should therefore form part of any wider IHT review.
7. Consider a Deed of Variation
If you have recently inherited assets, a Deed of Variation may allow beneficiaries to redirect some or all of their inheritance.
Where the relevant conditions are met, this can sometimes produce a more suitable estate planning outcome, including for IHT purposes.
Generally, a qualifying variation must be completed within two years of the death.
When should you review your Inheritance Tax planning?
You don't need to wait until retirement or until your estate exceeds a particular threshold.
A review can be especially worthwhile if:
The earlier you understand your position, the more opportunities you may have to plan effectively.
How Coles Miller can help
Inheritance Tax planning isn't simply about how much you own. It's about understanding how your assets, family circumstances and future wishes fit together.
At Coles Miller Solicitors, our experienced Wills, Trusts and Probate team can help you review your estate, understand the potential tax implications and consider appropriate steps to protect your family's inheritance.
We can advise on Wills, trusts, lifetime gifting, Deeds of Variation and succession planning, working alongside financial and tax advisers where specialist input is needed.
Your estate may be worth more than you think. Let us help you to find out.