You might think of your financial plan as being a way to help you reach your life goals. But it could benefit more than just you.
As a financial plan focuses on your goals, you might choose to include ways to create a legacy for your loved ones. It could mean your wealth provides long-term financial security to your children, grandchildren, and others who are important to you.
So, how could a financial plan help you create a legacy? There are two main options to consider.
You may set out how you’d like your assets to be distributed when you pass away
An inheritance has the potential to be life-changing. In fact, a Canada Life report found that almost 1 in 5 Brits are delaying major life plans until they receive an inheritance.
As a result, the assets you leave behind might help loved ones achieve important milestones, such as buying a property, or mean they feel financially secure enough to invest for their future.
Considering your estate and how it’ll change during your lifetime could mean you’re able to take steps that will make a material difference in the lives of your loved ones. You might choose to simply pass on assets according to the wishes you set out in a will, or weigh up other options, like using a trust to provide for vulnerable or younger family members, or to state how you’d like the assets to be used in the future.
If you’d like to talk about trusts and other ways to pass on wealth, please contact us.
You could gift with confidence during your lifetime
While leaving assets in a will is the traditional way to pass on wealth and create a legacy, you may choose to gift assets during your lifetime as well.
Indeed, according to a report in IFA Magazine, gifting is becoming an increasingly popular way to support loved ones. Data obtained from HMRC revealed a 48% rise in the number of families choosing to distribute some of their wealth before passing away when compared to 10 years ago.
A well-timed financial gift could have a positive effect on your family’s life and mean they’re more secure over the long term.
For instance, you might offer to provide a deposit that will help them get on the property ladder. It may help them buy sooner or cut the cost of a mortgage if they’re able to access a better interest rate as a result of your gift. Or covering one-off large payments so they don’t need to take out a loan could result in them saving thousands of pounds in interest.
Concern about how a gift would affect your financial security might hold you back from lending support when you want to. A financial plan may demonstrate the long-term effect gifting could have, so you can decide if it’s the right choice for you and proceed with confidence.
A financial plan could help you create a tax-efficient legacy
As well as setting out what you want to achieve with your financial legacy, a financial plan could also help you pass on assets in a way that’s tax-efficient for both you and your loved ones.
When you think about tax and your legacy, Inheritance Tax (IHT) might come to mind first. If the entire value of your estate exceeds the nil-rate band, which is £325,000 in 2024/25, your estate could be liable for IHT.
With a standard tax rate of 40%, IHT could reduce how much you pass on to loved ones. According to government figures, IHT receipts for April to September 2024 reached £4.3 billion – £0.4 billion higher than the same period last year.
There are often steps you can take to reduce a potential IHT bill if you’re proactive. If you’d like to learn what steps you may take, please get in touch.
When passing on assets during your lifetime, you might want to consider what’s tax-efficient for your loved one.
If you want to potentially give your family a long-term financial boost, you could deposit money into their Stocks and Shares ISA. In 2024/25, individuals can add up to £20,000 to tax-efficient ISAs. Investments held in an ISA aren’t liable for Capital Gains Tax, so it could help your gift go further than if they invested your gift outside of an ISA.
Speaking to your loved one could help you understand their goals and identify ways you may offer tax-efficient support that suits both you and them.
Get in touch to arrange a meeting to discuss your legacy
If leaving a legacy for your loved ones or lending financial support during your lifetime is important to you, making it part of your wider financial plan could be useful. Please contact us if you’d like to talk about your legacy with one of our team.
Please note:
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.
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.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
