PLANNIG YOUR INHERITANCE TO TRANSFER WEALTH TO THE NEXT GENERATION

Passing wealth to the next generation is a goal for many. Recent research shows that nearly half of us (47%) intend to leave a financial legacy, with a significant number planning to transfer assets directly to their children [1]. However, navigating the complexities of Inheritance Tax (IHT) can be daunting, leaving many uncertain about how to pass on their wealth in the most tax-efficient manner.

This desire for effective intergenerational wealth transfer occurs amid significant changes in the UK tax landscape. Recent Budget adjustments, such as making certain pensions liable for IHT and capping some types of tax relief, have prompted individuals to review their estate planning. With tax thresholds currently frozen and potential future, more people are understandably concerned about their financial future and are seeking professional advice to safeguard their legacy.

MODERN APPROACH TO ESTATE PLANNING

When planning how to organise yourestate, various tools are available. Oneoften overlooked but effective option isonshore investment bonds. These financialproducts provide a simple way to growyour savings within a tax-efficient wrapper.When incorporated into a broader financialplan, these bonds can play a crucial role inreducing potential IHT liabilities and enabling asmoother, more organised transfer of wealth toyour loved ones.

A key advantage of onshore bonds is their flexibility. They can be transferred to family members, such as children or grandchildren, through a Bare Trust without incurring an immediate tax charge. Once transferred, the new owner is considered to have owned the bond from the beginning. This allows them to utilise valuable features like full top-slicing relief and any unused 5% tax-deferred allowances on future withdrawals, which can lead to significant tax savings.

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Source data:

[1] Data used from a survey of 4,000 nationally representative UK adults conducted for LV= by Opinium in March 2025.

This article is for information purposes only and does not constitute tax, legal or financial advice. Tax treatment depends on individual circumstances and may change in the future. The value of your investments (and any income from) can go down as well as up, and you may get back less than you invest.