Estate planning is not only about writing a will or deciding who gets the house. It is the practical process of making sure the right people receive the right assets, at the right time, with as little tax, cost and stress as possible. With inheritance tax (IHT) bands frozen and property values still high, more middle‑income families are being drawn into the IHT net – even if they never expected to be. HMRC’s latest monthly bulletin shows IHT receipts of £2.2bn for April to June 2025, £0.1bn higher than the same period last year (HMRC, 2025). Meanwhile, median household wealth (excluding pensions) stands at £181,700 – a reminder that wealth is often tied up outside pensions and can be exposed to IHT without sensible planning (ONS, 2024).
At Pearson May, we have been helping families plan for over 180 years. In that time, the building blocks of effective estate planning have stayed broadly consistent: understand the tax, get a will in place, use allowances and reliefs sensibly, and review your plan regularly. In this guide, we set out the essentials of estate planning – focusing on IHT, wills and trusts – so you can preserve more of your wealth for the next generation.
Why estate planning matters – even if you don’t think you’ll pay IHT
Only a minority of estates pay IHT, but frozen thresholds and rising asset values mean more families are edging closer to it each year. Add to that the administrative strain your executors face if your affairs are not in order, and the case for acting early is clear. Estate planning is also about control: who will look after minor children, who will run the family business, and how do you protect vulnerable beneficiaries?
Know your inheritance tax building blocks
Before you can plan, you need to know the rules that apply in 2025/26:
- Nil‑rate band (NRB): £325,000 per person. Amounts above this are normally taxed at 40%.
- Residence nil‑rate band (RNRB): £175,000 per person when a qualifying home passes to direct descendants. This tapers away by £1 for every £2 your estate exceeds £2 million.
- Transfer between spouses/civil partners: Any unused NRB and RNRB can usually be transferred, giving many couples up to £1 million of combined nil‑rate bands on the second death.
- Rate reduction for charities: Leave 10% or more of your net estate to charity and the IHT rate on the rest can fall to 36%.
- Seven‑year rule: Larger lifetime gifts are generally outside your estate if you survive seven years; taper relief can reduce the tax on gifts made 3-7 years before death.
- Business and agricultural reliefs: These can still shelter significant value but are complex – professional advice is essential, especially as rules are under constant review.
Write (and keep updating) a will
A valid, up‑to‑date will is the foundation of every plan. It lets you:
- Appoint executors and guardians.
- Direct assets to the right people (and in the right way – outright or via trust).
- Maximise use of the RNRB and transferable allowances.
- Avoid intestacy, which rarely aligns with your wishes.
If your will predates the introduction of the RNRB or still sends the family home into a discretionary trust, it may blunt your reliefs. A quick review can save a significant amount of tax.
Trusts: Powerful, but not always necessary
Trusts can help when you want: control over how and when beneficiaries inherit; to protect vulnerable or spendthrift beneficiaries; or to ring‑fence growth outside your estate. But they come with their own tax regimes, reporting obligations and potential 10‑year and exit charges. The right trust, for the right reason, with full cost–benefit clarity, can still be very effective. The wrong one just adds admin and expense.
Make gifts the smart way – and document them
HMRC provides several exemptions that let you reduce your taxable estate during your lifetime:
- Annual exemption: You can give away up to £3,000 each tax year (and carry forward one unused year). (HMRC, 2025).
- Small gifts: Unlimited gifts of up to £250 per person per tax year (provided no other exemption is used for that person).
- Regular gifts out of income: Larger, routine gifts can be immediately outside your estate if they are made from surplus income and do not affect your standard of living – keep careful records.
- Wedding/civil partnership gifts: Up to £5,000 to a child, £2,500 to a grandchild or great‑grandchild, and £1,000 to anyone else.
Keep a simple schedule of gifts, with dates, amounts, recipients and which exemption you are relying on. Your executors will thank you.
Estate planning in 2025/26: What to check now
A short review each year can prevent expensive surprises:
- Does your will still reflect your wishes? Life events – marriage, divorce, births, business sales – often mean it doesn’t.
- Are you using both spouses’ allowances? Consider how assets are owned so both NRBs and RNRBs can be claimed.
- Is your estate near the £2 million taper threshold? Simple steps – from lifetime gifting to charitable legacies – can restore or enhance your RNRB.
- Do you have up‑to‑date valuations? For property, business interests and AIM shares that might qualify for reliefs, values matter.
- Are your trusts compliant? The Trust Registration Service, 10‑year charges and exit charges all need attention.
- Lasting powers of attorney (LPAs): Not an IHT point, but essential. If you lose capacity, LPAs keep your financial and health decisions with the people you choose.
How we work with you
We start with your goals – family, business, philanthropy – and map the tax and legal tools to those goals. Then we:
- Model the numbers: Cashflow, potential IHT and the impact of different strategies.
- Optimise allowances and reliefs: NRB, RNRB, gifting exemptions and, where relevant, business and agricultural reliefs.
- Coordinate with your solicitor and financial planner: Wills, trusts, investment wrappers and pensions must work together.
- Review annually: Tax rules move, asset values change and families evolve. Regular reviews keep your plan fit for purpose.
(For a deeper, personal discussion, explore our tax planning services or speak to our team via our contact page.)
Ready to secure your family’s future?
Estate planning is not a one‑off task – it is a rolling programme of sensible decisions, recorded properly and reviewed regularly. Thresholds stay frozen, values move, families change, and what looked efficient five years ago can now leak tax or create avoidable admin for your executors. A stronger conclusion, then, is this: take control early, keep good records, and make reviewing your position part of your normal financial housekeeping.
That means checking your will still does what you want it to do, confirming your estate will qualify for both nil‑rate bands, and making sure lifetime gifts are structured – and evidenced – so they deliver the result you expect. It also means considering letters of wishes to guide your trustees, keeping LPAs in place so someone you trust can act if you cannot, and stress‑testing your plan against different scenarios: second marriages, vulnerable beneficiaries, business exits, or a rise in asset values that pushes you over the residence nil‑rate band taper. Done well, estate planning provides clarity for you now and reduces friction for your family later.
If you would like us to review your will, value your likely IHT exposure, model the effect of gifts or trusts, or simply put a clear action list in front of you, get in touch. We will explain the options in plain English, co‑ordinate with your solicitor and financial planner, and keep everything under review so your estate planning continues to protect the people and causes you care about. Let’s make sure your wealth goes where you intend – efficiently, transparently and with minimum stress.