An inheritance tax expert has warned that straightforward oversights in estate planning could leave families facing bills of hundreds of thousands of pounds. Many people draft a will without addressing inheritance tax implications, a critical oversight given that the tax can claim up to 40% of an estate above certain thresholds.
The tax is often payable before loved ones can access bank accounts or property, forcing families to raise large sums during a period of grief.
Laura Rumsey from Rogers and Norton said: “I regularly see families caught out by the same avoidable mistakes. These are not complex loopholes; they are straightforward steps that many people just don’t realise they need to take. By understanding the rules and planning ahead, families can protect what they’ve worked hard for and avoid leaving their loved ones with an unexpected and potentially devastating bill.”
Not being married could cost a partner hundreds of thousands of pounds. With UK marriages predicted to fall to historic lows, and only about three in 10 people expected to marry by 2050, many couples may overlook the financial consequences.
Laura explained: “If you are married and leave assets to your spouse, you are able to claim spousal exemption. This is important as the transfer between spouses on death means none of the estate is lost to tax.”
This allows assets to pass tax-free, and “when the second spouse dies you will also have the availability of their unused tax-free bands,” potentially enabling families to pass on up to £1 million without inheritance tax. Laura emphasised: “Being married really is beneficial for tax planning and remember that legally there is no such thing as a common law spouse.”
An unmarried partner inheriting a £500,000 estate could face a bill of around £70,000, a costly shock many simply don’t see coming.
For many parents, the family home holds deep sentimental value. Most wish to pass it on but may not realise it can unlock a significant additional allowance.
Laura shared: “If you have a property that you are planning to leave to your children you can claim up to an additional £175,000 each (for you and your spouse, depending on the value of your property).”
When combined with the standard nil-rate bands of £325,000 each, Laura said: “this could mean that with a carefully planned Will, married couples with children could claim up to £1 million tax-free allowances on second death.”
Without proper planning, families risk losing part of that allowance and paying far more tax than necessary. The residence nil-rate band applies when leaving a qualifying residence to direct descendants, with thresholds fixed at current levels until at least 2030–2031.
When wealth passes through generations, assets risk being taxed multiple times. Many families overlook a legal mechanism to adjust an inheritance after death.
Laura said: “Often people’s wealth can be generational and to avoid double taxation of the same assets it is possible to consider deeds of variation. These legal documents allow adult beneficiaries with capacity to change the distribution of their inheritance to other people, usually their children. This means that the gift comes from the original deceased and can bypass a generation, ensuring that wealth is passed on efficiently.”
Importantly, Laura added: “these deeds of variation can be considered and prepared up to two years after the date of death, which allows for careful planning before being actioned.” For families seeking professional advice, this two-year window can lead to substantial savings by treating the varied distribution as if made by the deceased for inheritance tax purposes.
Inheritance tax remains a significant concern, with the standard 40% rate applying above thresholds. Core allowances like the £325,000 nil-rate band and £175,000 residence nil-rate band remain frozen. Planning ahead—including considering marriage status, wills that maximise allowances, and post-death options like deeds of variation—can help protect family wealth.