Legacy planning is a key concern for many people seeking support from financial planners. After all, it’s only natural to want to ensure your loved ones are secure after you’re gone.
However, understanding how much you can and should leave to your beneficiaries can be complex and requires open, honest conversations as well as careful planning and preparation.
By taking steps now, you can help ensure your legacy fulfils your wishes and your loved ones are supported after you die.
Read on to find out how much you should leave in your legacy.
Your financial needs should come first
Whatever your plans are for your legacy and beneficiaries, it’s important to ensure your own needs are covered first.
For instance, you don’t want to set aside money in a trust to be left to your loved ones, only to find later that you need those funds to support your own goals or to pay for unexpected expenses.
Before deciding how much you would like to leave to your beneficiaries, make sure you have a clear plan for covering your own costs. This should include providing for your retirement, which may last longer than you expect, as well as considering the potential cost of care for you or your partner.
Of course, circumstances can change. You may find that you don’t need all the funds you have set aside for yourself and are able to pass on more wealth than originally planned. That’s why it’s a good idea to view financial planning as an ongoing process rather than a one-off exercise, as it allows you to adapt your plans as your life and goals change.
Leaving assets to certain beneficiaries can improve the tax efficiency of your estate
A key consideration when deciding how much to leave to your beneficiaries is Inheritance Tax (IHT) planning. How you distribute your assets and who they go to can have a significant impact on the overall tax efficiency of your estate.
For instance, in addition to the standard nil-rate band of £325,000 (2026/27), you can also benefit from the residence nil-rate band (RNRB), which is an additional allowance of up to £175,000. The RNRB is available when you leave your main residence to direct descendants, such as children or grandchildren.
Moreover, any assets you leave to your spouse or civil partner are typically exempt from IHT. This can be particularly useful when planning your estate as a couple, as you can transfer any unused nil-rate band and RNRB to the surviving partner. This means that with careful estate planning, you and your partner may be able to pass on up to £1 million free from IHT.
Understanding these allowances is important when considering how much to leave to your beneficiaries, as any portion of your estate that exceeds the available thresholds will typically face IHT at a rate of 40%.
Additionally, some asset types may be more efficient than others. For example, certain assets eligible for Business Relief (BR) or Agricultural Relief (AR) can qualify for up to 100% IHT relief. And assets left in trust can also be IHT-free, provided certain conditions are met.
A financial planner can help you create an estate plan that makes full use of your available allowances to ensure your legacy is as efficient as possible.
Communication and understanding your beneficiaries’ goals can help your estate planning
When deciding what to leave to your beneficiaries, it can be helpful to consider their own financial goals and circumstances, as these may influence how you choose to structure your estate.
For example, a beneficiary who plans to have children may face significant future expenses, such as independent school fees or university costs. In these cases, you may decide to leave assets in a trust or invest funds on their behalf to allow future generations to benefit from your wealth.
Similarly, you may have beneficiaries who require more financial support than others. For instance, a family member who owns a small business may face more financial challenges than someone in employment. So, you might choose to leave them additional assets, such as a larger share of your pension wealth, to help support their long-term goals.
You might also want to skip a generation and leave everything you have to your young grandchildren rather than your adult children. Or you may have a vulnerable beneficiary who requires additional support.
Legacy planning isn’t always about treating beneficiaries equally. Rather, it’s about considering their individual needs and deciding how your wealth can have the greatest overall impact.
Indeed, if your family is already financially secure and well supported, you might consider leaving more of your wealth to charity. If you leave 10% of your net estate to charity in your will, the IHT rate on your estate reduces from 40% to 36%. So, donations and charitable giving can also affect how much you leave to your beneficiaries.
It’s important to maintain open and honest communication throughout the process, as that way your beneficiaries won’t be surprised or upset by any of the decisions you make.
Giving gifts while you are alive can be an effective part of legacy planning
You also don’t have to wait until death to pass wealth on to your beneficiaries.
Giving gifts during your lifetime allows you to see the impact of your support and can also reduce the overall value of your estate for IHT purposes, as most gifts aren’t liable for IHT provided you survive seven years after giving them.
Gifting can be particularly useful for efficiently passing on specific assets that carry emotional weight. For example, you may have a child who has always been fond of a piece of jewellery. If you leave it in your will, it will form part of your estate and may be liable for IHT, but if you gift it to them, it won’t be, as long as you survive long enough after making the gift.
Finally, it is worth noting that from April 2027, pension wealth is expected to fall within the scope of IHT. This may make pensions an increasingly important consideration in lifetime gifting and broader estate planning strategies.
As always, any gifting strategy should be balanced carefully against your long-term needs and reviewed regularly as your circumstances change.
Get in touch
There is no “right” amount to leave your beneficiaries, and the answer depends on your own financial security as well as the goals of your loved ones.
A financial planner can help you create a plan that balances your needs and enjoyment in your lifetime with support for the people and causes that matter most to you.
To speak to a financial planner, get in touch.
Email us at hello@vwmwealth.com or call us on 0141 229 4004.
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, tax planning, trusts, 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.
