You may see your financial plan as a tool to help you achieve your personal life goals, but it can also go beyond benefiting just you.
By centering your financial plan on your objectives, you could incorporate strategies to build a lasting legacy for your loved ones. This might allow your wealth to provide enduring financial stability for your children, grandchildren, or others who matter most to you.
But how can a financial plan assist in creating a legacy? Here are two key approaches to explore.
You can outline how you want your assets to be distributed after your passing
Inheritance can significantly impact individuals’ lives. In fact, a Canada Life report found that almost 1 in 5 Brits are delaying major life plans until they receive an inheritance.
The assets you pass on could enable your loved ones to reach significant milestones, like purchasing a home, or provide them with the financial confidence to invest in their future.
Thinking about your estate and how it may evolve over your lifetime can help you take actions that make a meaningful impact on your loved ones. You might decide to pass on your assets according to your will or consider other options, such as setting up a trust to support younger or vulnerable family members, or specifying how you’d like the assets to be used in the future.
Please contact us if you’d like to talk about trusts and other ways to pass on wealth.
You can confidently give gifts during your lifetime
Leaving assets in a will is the traditional way to transfer wealth and establish a legacy, but gifting during your lifetime is another meaningful option to consider.
Indeed, according to a report in IFA Magazine, gifting is becoming an increasingly popular way to support loved ones. HMRC data shows a 48% increase in families choosing to share their wealth during their lifetime compared to a decade ago.
A well-timed financial gift can positively impact your family’s life, providing them with greater long-term security.
For example, contributing towards a deposit could help them purchase a property sooner or secure a better mortgage interest rate, potentially reducing their overall costs. Alternatively, covering large one-off expenses might save them thousands in loan interest by eliminating the need for borrowing.
If you’re hesitant to offer support due to concerns about your own financial security, a financial plan can provide clarity. It can show the long-term effects of gifting, helping you decide if it’s the right step and enabling you to give with confidence.
A financial plan can help you build a tax-efficient legacy
In the 2024/25 tax year, the standard Inheritance Tax (IHT) threshold, known as the nil-rate band, is £325,000. Estates exceeding this amount may be subject to a 40% tax on the value above the threshold. Additionally, the residence nil-rate band allows an extra £175,000 when passing on a main residence to direct descendants, bringing the total potential tax-free allowance to £500,000 per individual. For married couples or civil partners, this combined allowance can reach up to £1 million.
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, it’s worth considering how to do so in a tax-efficient way for your loved ones.
One option for providing a long-term financial boost is contributing to their Stocks and Shares ISA. In 2024/25, individuals can invest up to £20,000 into ISAs, which are tax-efficient. Investments held in an ISA are exempt from Capital Gains Tax, allowing your gift to grow more effectively compared to investing outside of an ISA.
Discussing their goals with your loved one can help you identify the best ways to provide support that is both tax-efficient and aligned with their needs.
Contact us to discuss your legacy plans
If creating a legacy for your loved ones or offering financial support during your lifetime matters to you, incorporating it into your financial plan can be invaluable. Get in touch to arrange a meeting with our team and explore your options.
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.
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