Will You Keep The Wealth You’ve Created In The Hands of Your Family?

Transferring wealth across generations comes with a unique set of hurdles

Building wealth is a significant achievement, often culminating in years of hard work, sacrifice, and savvy decision making. However, preserving that wealth for the benefit of your family can be just as challenging, if not more so. For UK individuals, transferring wealth across generations comes with a unique set of hurdles, including tax liabilities, family disagreements, and the pitfalls of insufficient estate planning. Without proper foresight, the financial legacy you’ve worked hard to build could be significantly diminished—or lost altogether. To ensure your wealth stays where it belongs— in the hands of your loved ones—careful financial and estate planning is key. Below, we’ll explore the common problems UK families face in wealth preservation and discuss actionable solutions to protect your family’s financial future.

The challenges of protecting your wealth 

1. The heavy burden of Inheritance Tax 

For UK residents, Inheritance Tax (IHT) is one of the greatest threats to preserving wealth. Charged at 40% on the value of your estate above the nil-rate band (currently £325,000 per individual, or up to £1 million for a married couple with the residence nil rate band), IHT can take a substantial chunk out of your legacy before it even reaches your heirs. Without proactive planning, your family may be forced to sell assets—such as property or a family business—to cover the tax bill.

2. Family disputes and legal challenges 

Wealth and inheritance can bring complex emotions to the surface, occasionally leading to disputes among loved ones. Unclear or contested Wills can cause rifts within families, with expensive legal battles often following. This can result in stress, delays, and the erosion of the wealth you sought to preserve.

3. Lack of clear estate planning 

An alarming number of people in the UK still do not have a valid Will in place. Without one, your estate will be distributed according to the rules of intestacy, which may not align with your wishes. Additionally, a lack of comprehensive planning can leave your wealth exposed to unnecessary taxes, fees, and financial risks.

4. Generational wealth dilution 

Passing wealth down unstructured can lead to it being unintentionally diluted over time. For example, funds might be spent unwisely by younger generations or divided in ways that don’t align with your long-term vision for your family’s financial future.

Practical solutions to keep wealth in the family 

While the challenges are significant, there are plenty of strategies to safeguard your wealth and ensure it’s passed down on your terms. Here are tried-and-tested financial and estate planning tools you should consider.

1. Trusts for tax-efficiency 

Setting up a trust can be a highly effective way to shield your wealth from IHT while maintaining control over how it is used. Trusts enable you to set specific conditions for how and when beneficiaries access their inheritance, providing a layer of financial protection and oversight. For instance, a discretionary trust can allow trustees to manage the distribution of funds as circumstances change, protecting the trust assets from misuse or family disputes.

2. Drafting a watertight Will 

A professionally drafted Will is essential to ensuring your assets are distributed as you wish. It eliminates ambiguity, prevents disputes, and can help minimise IHT liabilities. Regularly reviewing and updating your Will—particularly after major life changes like marriage, divorce, or the birth of a child—is equally important to keeping it aligned with your wishes.

3. Lifetime gifts 

Gifting assets during your lifetime can significantly reduce the size of your taxable estate. For example, you can make annual gifts of up to £3,000 per individual without any inheritance tax implications. Larger gifts may also become tax-free if you survive for seven years after making them. This strategy enables you to see your loved ones benefit from your generosity while reducing your IHT exposure.

4. Investing in tax-efficient products 

Tax-efficient investments, such as Individual Savings Accounts (ISAs) and pensions, can help you grow and preserve your wealth without incurring unnecessary tax burdens. Enterprise Investment Schemes (EIS) and Business Relief-qualifying investments may also offer inheritance tax relief, though these types of investments carry a higher level of risk. When you consult with Horizon, we will help you choose the most suitable investment strategy based on your circumstances.

5. Insurance policies to cover IHT

Inheritance tax liabilities can be mitigated by taking out a life insurance policy written in trust. The payout from this policy can be used by your heirs to cover any IHT bills without having to sell off family assets like property or businesses.

6. Family governance and open communication 

Preventing disputes and fostering family harmony often necessitate more than legal frameworks. Establishing clear family governance and engaging in open discussions about your financial plans can aid in managing expectations, avoid misunderstandings, and create a shared vision for wealth preservation.

Ready to take action to secure your family’s future? 

The process of protecting your wealth and creating a sustainable financial legacy for your family may seem daunting, but you don’t have to tackle it alone. Expert advice is essential to navigating complex tax rules, structuring your affairs, and ensuring your wishes are upheld. Contact Horizon today if you’re ready to take the next step toward safeguarding your wealth. We’ll help you design a personalised strategy that minimises tax liabilities, avoids unnecessary risks, and keeps your hard earned wealth firmly in the hands of the people who matter most—your family.

ARTICLES DO NOT CONSTITUTE TAX, LEGAL, OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

THE FINANCIAL CONDUCT AUTHORITY DOESN’T REGULATE WILLS, TRUST PLANNING AND MOST FORMS OF INHERITANCE TAX (IHT) PLANNING. SOME IHT PLANNING SOLUTIONS PUT YOUR MONEY AT RISK, AND YOU MAY GET BACK LESS THAN YOU INVESTED. IHT THRESHOLDS DEPEND ON INDIVIDUAL CIRCUMSTANCES AND THE LAW. TAX AND IHT RULES MAY CHANGE IN THE FUTURE.