Our recent YouGov survey gives an insight into how confident people feel about wealth and estate planning, and the extent to which they value professional advice. Of those surveyed, 43% said they believe they have a clear understanding of the tax implications of their wealth and inheritance planning, while 46% agreed that taking professional advice is important.
That confidence is encouraging, but it does not always translate into effective, joined-up planning. Wealth planning often involves rules that change regularly and apply differently depending on a person’s circumstances. The amount of information available online may create a sense of familiarity, but there remains a significant gap between general knowledge and the tailored analysis needed to plan properly. That gap helps explain why many people recognise the value of expert advice.
A broader perspective is essential. Effective planning means considering how each decision affects the overall position, rather than focusing on a single outcome or on mitigating one tax in isolation. Even well-intentioned and well-researched steps can create unintended legal or tax consequences elsewhere.
Artificial insight? The limits of online information
There is a great deal of information about tax and tax planning available online, but it can become out of date quickly. More importantly, generic guidance rarely explains how a particular step may affect other taxes, forced heirship rules, family dynamics or asset protection issues. There is a real risk in relying on online information without understanding its limits, or in assuming that a general rule can be applied safely to individual circumstances.
Why tunnel vision creates risk
By way of example, you may read that if you gift an asset to your child and survive for seven years, the value of that asset will no longer form part of your estate for inheritance tax (IHT) purposes. That may be correct and may represent sensible IHT planning. But what if the gift triggers an immediate capital gains tax charge, which has to be funded from other assets - and accessing those assets carries its own tax consequences?
There are non-tax risks too. If the child who receives the gift later divorces, or gets into financial difficulty, the gifted asset may become exposed to claims from a former partner or creditors.
Another example is a will that leaves the whole estate to a surviving spouse or civil partner. That approach may appear straightforward, and the transfer on death will usually qualify for 100% spouse or civil partner exemption from IHT. However, what if an estranged child claims their legal rights despite the terms of the will? That may affect the IHT analysis and raise practical questions about which estate assets should be used, or sold, to meet the claim. What if the estate includes assets that qualify for relief, such as business or agricultural assets, and it would be more appropriate to use that relief on the first death rather than passing those assets outright to the surviving spouse or civil partner?
There are further questions to consider. What if the surviving spouse remarries, requires residential care, or later changes their own will in favour of different beneficiaries? A simple plan may not remain simple once life, family circumstances and tax rules are taken into account.
Why professional legal advice matters
Our role is to understand your overall objectives and advise in a way that is both holistic and bespoke. A good adviser will consider the relevant tax, legal and practical issues — including family dynamics — and look at the full picture rather than treating each point in isolation. Effective planning requires peripheral vision, not tunnel vision.
Why regular reviews are essential
Life moves quickly, and it is important to revisit your planning periodically. The passage of time, perhaps every three to five years, or the occurrence of major life events such as births, deaths, marriages, divorces or moving country, should prompt a review of whether the current plan remains sensible and workable.
Where planning is being undertaken, particularly more sophisticated planning involving trusts or estate planning structures, it is also important that everyone involved understands the intended objectives and their individual roles.
The importance of family discussion
The survey also found that 69% of people agreed it is important to have a family discussion about wealth or inheritance planning before death. Open conversations can be an important part of successful intergenerational planning.
We encourage clients to consider discussing their plans with their intended executors, trustees and beneficiaries, where appropriate, to reduce the risk of confusion or disappointment later. There will be circumstances where these conversations are not suitable, but openness can often help to avoid misunderstandings and difficult surprises after the death of a loved one.
We regularly see the consequences of people not taking advice, or taking advice that does not address the full picture. The result can be unintended and unforeseen outcomes, unnecessary stress, and damage to family relationships.
The support of a trusted adviser can help you see the whole picture and identify the challenges that may affect your objectives. Expert, bespoke advice, combined with regular reviews, can help you make informed decisions and have the right conversations to protect your wealth and, ultimately, your loved ones.
Explore the full findings
Our Future of wealth transfer survey offers a unique insight into the hopes, hesitations and expectations of people across the UK when it comes to passing on wealth. To see more data and expert commentary, view the full survey here.
Please get in touch to start your wealth planning conversation.
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