Read more articles in: Blog, Emma Sommerville, Private Client

Is it time to update your Will to protect your pension from Inheritance Tax changes?

With the announcement that inherited pensions will fall under the Inheritance Tax (IHT) regime from April 2027, many are considering how this might affect their estates and whether their Wills need updating to address these changes.

In the recent Budget, Chancellor Rachel Reeves proposed changes that will see pensions treated as part of an individual’s estate for IHT purposes.

This change, combined with the freeze on IHT thresholds until 2030, means that more estates will likely exceed the £325,000 IHT threshold.

Why update your Will now?

If you have a pension, you may want to ensure that it is passed on in the most tax-efficient way possible.

This might mean reconsidering your current Will and possibly adjusting any existing expression of wish forms for your pension.

Reviewing your expression of wish form

An expression of wish form is a document that directs your pension provider on who should receive your pension benefits when you pass away.

Reviewing and possibly updating this form will make certain that your pension aligns with your current wishes.

For example, leaving your pension to a spouse can help reduce the IHT burden on your estate, as assets passed to a spouse are generally exempt from IHT.

Our solicitors can ensure that your expression of wish form is set up to reflect your intentions and optimise the tax position for your beneficiaries.

Exploring flexible Will structures

A flexible Will, such as one that includes a discretionary trust, allows you to adapt your asset distribution based on future changes in tax laws.

With a discretionary trust, your estate can allocate assets to beneficiaries at the trustee’s discretion, which can help manage how and when assets are distributed, potentially reducing exposure to IHT.

This structure offers a flexible approach, allowing trustees to make decisions that align with both your intentions and current tax laws, providing peace of mind that your assets are protected even as laws change.

Considering lifetime gifting

If you are looking to reduce the taxable value of your estate, lifetime gifting can be an effective strategy.

Gifting assets to loved ones during your lifetime can help you decrease the value of your estate, thus reducing IHT liabilities.

Gifts made seven years prior to your death are exempt from IHT, making early planning important.

Whether gifting cash, property, or other assets, consulting with our team can guide you on how to structure these gifts to maximise the benefit for both you and your beneficiaries.

Taking steps now to protect your estate against IHT changes can help avoid any issues in passing on your pension.

Our team of experienced solicitors can provide you with advice, ensuring that your Will and pension planning strategies reflect both your current wishes and the upcoming changes.

If you would like to review your Will in light of the Budget announcement, contact us today.