How to effectively pass your wealth onto your family


There are many complexities when it comes to passing your wealth onto your family, and therefore, it’s important to establish the best approach to handling your estate effectively.

In this article, you’ll learn how wealth is passed on, how inheritance tax can impact your estate, and how things like a wealth management service can help you optimise your approach.

How is wealth passed onto your family?

When you pass wealth onto your family, this is known as their inheritance, and the wealth you leave for them is known as your estate. The assets you bequeath to your family can range from things like cash and property to investments, antiques, or bonds.

Passing wealth onto your family is usually done when you pass away, and your estate is divided according to your will. However, without a will in place, this process is more complex.

There are also ways you can pass on your wealth while you’re still alive, such as gifting things like cash and property within certain limits.

How can inheritance tax impact your estate?

When your family inherit your estate there may be tax charges applied to it, known as inheritance tax (IHT).

How much your family will be required to pay will depend on whether your estate falls above or below the IHT threshold. This is a specific limit on the value of your estate, which shelters all your estate from tax if its value is beneath the specified amount.

As of the current tax year, 2022/2023, the IHT threshold is £325,000. This means any beneficiaries will not be required to pay IHT for anything below this amount. However, if the value of your estate exceeds this threshold, your beneficiaries will be taxed at a rate of 40%.

How can you pass on your wealth more effectively?

There are some things you can do to ensure your wealth is passed onto your family more effectively, such as:

  • Obtain a wealth manager

One of the best ways to ensure your wealth is passed on effectively is to seek the guidance of a modern wealth manager.

Your expert adviser will help you outline the best approach towards leaving your estate, so that as much of your money is sheltered from tax as possible when passing it onto your loved ones.

Your adviser will also take into account every aspect of your finances, including any concerns or challenges you might be facing. This ensures their advice is tailored to your unique financial circumstances, and gives you the best chance of a successful financial outcome.

  • Put a will in place

Another great way to pass on your wealth effectively is to devise a will.

This allows you to have more control over where and how your estate is distributed after you pass away. Thus, you and your adviser can structure the best approach to your estate to ensure it’s optimised for tax-efficient inheriting once you’ve passed away.

Without a will you’ll have less say over where your estate might go, and this can result in potential IHT charges that could have been avoided.

  • Leave your estate to a spouse or civil partner

You can also pass on your wealth more effectively by ensuring your estate goes to your spouse or civil partner.

As of the current tax year, there is no IHT charged to any of your estate that’s left to your spouse or civil partner – including that which is above the IHT threshold.

If you wish to distribute your estate anywhere else, this will need to be kept under the threshold to remain sheltered from tax.

Now you know some of the ways you can effectively pass on your wealth to family, consult with your wealth manager to start devising the best approach to optimise your finances.

Please note, the value of your investments can go down as well as up.