When you are building your estate plan, writing your will, and deciding how much to leave your beneficiaries, you may choose to simply divide your legacy equally between your loved ones.
While this is a perfectly acceptable approach, it may not be the best use of your wealth after you’re gone. Indeed, both you and your beneficiaries may be better served by a more considered approach to estate planning.
This all comes down to knowing how much is “enough” for you and your loved ones, and what role your legacy can play in that.
Read on to find out how you can determine how much to pass on in your will.
Make sure your needs are looked after
When you’re making plans for the wealth you hope to pass on, it’s easy to focus on your loved ones and their goals. However, your first priority should always be your own financial security.
If you start gifting your wealth to younger generations or putting assets in trust, only to later discover that you need that money yourself, you may end up in a financially vulnerable position. This can mean that your wealth isn’t used according to your long-term needs and wishes, and could be detrimental to both you and your beneficiaries.
Retirement can span several decades, and unexpected costs, such as long-term care, can have a significant impact on your finances. So, a sensible starting point is to work out how much you’ll need to maintain financial security throughout retirement before deciding what you can comfortably leave behind.
Once you’ve accounted for your own needs, you can make plans to pass on your remaining wealth with greater peace of mind.
A financial planner can use cashflow modelling to help you understand how much will be enough to support your retirement lifestyle and what you are likely to have left over once that’s accounted for.
Of course, these decisions aren’t set in stone, and your circumstances, spending, and goals may change over time. But it’s good to have a starting figure and to review your plans regularly to ensure they continue to reflect your needs and your wishes.
How you distribute your estate can impact the tax liability
Who inherits your wealth can affect the amount of Inheritance Tax (IHT) your estate ultimately pays. So, when deciding how much to leave in your legacy, it’s important to know the reliefs and available allowances, as this can determine how much your beneficiaries receive.
For the 2026/27 tax year, the main IHT reliefs include:
- The standard nil-rate band. This is available to everyone and allows you to pass on up to £325,000 before IHT becomes payable.
- The residence nil-rate band (RNRB). If you leave your main home to direct descendants, you may qualify for an additional £175,000 allowance. This relief gradually tapers for estates valued above £2 million.
- The spouse or civil partner exemption. Assets you leave to your spouse or civil partner are generally exempt from IHT. Any unused nil-rate bands can also typically be transferred to the surviving partner, meaning many couples can pass up to £1 million before IHT is due.
Amounts above the available allowances are generally taxed at 40%.
You may want to revisit your will to ensure you make full use of your allowances. For instance, this could include making a joint plan with your spouse that leaves everything to each other until both of you have died, and then ensuring your beneficiaries benefit from the RNRB.
Understanding your beneficiaries’ goals can help you determine how much is enough to leave
Once you’ve ensured your own financial security and considered your estate’s tax liability, you can then turn to the individual goals and needs of your beneficiaries. Their circumstances may influence both how much you leave them and how you choose to pass it on.
For example, one may be raising a young family and could face significant future costs, such as education or childcare, which could mean they benefit from inheriting a trust. Another may be running a business and may be better served by inheriting a lump sum to invest in it.
You may also decide to skip a generation and leave your wealth to your grandchildren, so they don’t face two rounds of IHT before benefiting from your legacy. Or you might have a vulnerable beneficiary who is likely to need ongoing support, and you may decide to leave them more than others.
Whatever their circumstances, your beneficiaries’ goals are likely to be different, meaning what constitutes enough for them won’t always be the same. This may mean you don’t leave the same amount in the same form, which may require open and honest conversations with your family about your intentions to help manage expectations and explain your decisions.
Financial planning can help you improve the efficiency of your legacy
After covering your own needs and understanding your tax liability and beneficiaries’ goals, you may worry that your estate will no longer be enough to support your legacy wishes.
However, a financial planner can work with you to implement additional strategies that could improve the efficiency of your legacy and increase the amount you pass on.
This may include:
- Lifetime gifting – Making gifts can allow your family members to benefit from your legacy sooner, while also potentially reducing the size of your estate for IHT purposes.
- Putting assets in trust – Assets held in trust are typically considered outside of your estate for IHT purposes.
- Charitable donations – Leaving at least 10% of your net estate to charity can reduce the IHT rate on the remainder of your estate to 36%.
- Investing in Business Relief (BR) schemes – Certain qualifying business assets, including investments, can benefit from up to 100% IHT relief up to a total value of £2.5 million, provided certain conditions are met.
Because estate planning involves a range of rules and exemptions, it’s important to seek advice before making significant decisions.
Get in touch
Our team of independent financial advisers in Lewes is here to support you in building your estate plan in a way that reflects your wishes while making the most of the allowances and reliefs available.
To find out more, please get in touch by emailing us at financial@barwells-wealth.co.uk or by phone on 01273 086 311.
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 Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
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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