Helping clients leave a legacy – not a liability

Inheritance Tax (IHT) planning no longer concerns only the ultra wealthy. Rising property values¹, frozen thresholds² and complex family situations are putting more clients at risk of leaving unnecessary tax burdens for their loved ones.

As a financial adviser, you’re in a strong position to help clients understand their exposure and implement practical, long-term solutions. By combining gifting strategies, protection planning and trust structures, you can help clients take control of their legacy, making sure more of their wealth passes to the people who matter most.

Why IHT planning matters more than ever

IHT is typically payable at 40% on the value of an estate above the nil-rate band (NRB) of £325,000³. Additional complexity can come from the residence nil-rate band (RNRB) and tapering for larger estates. Estates often can't be distributed until IHT has been settled, which creates liquidity challenges for families during an already difficult time.

Many clients underestimate their estate’s size. Beyond property, savings and investments, estates can include insurance policies, personal possessions, certain trust-held assets and gifts made within the last seven years - or even earlier if the client still benefits from them.

With proposals to include unused pension funds and death benefits within the taxable estate from April 2027⁴, the need for proactive planning will only increase.

Using gifting strategies during lifetime to reduced IHT on the estate

Lifetime gifting remains one of the most effective ways to reduce IHT exposure. When structured correctly, gifts fall outside the estate entirely, if the donor survives for seven years.

Clients can use several exemptions, including⁵:

• the £3,000 annual exemption, which can be carried forward for one year if unused
• regular gifts made from surplus income, with no upper limit if conditions are met
• small gifts of up to £250 per recipient each tax year
• gifts on marriage or civil partnership
• unlimited exempt transfers between spouses or civil partners.

However, gifting also introduces risk. If a client dies within seven years, the recipient could face an unexpected IHT bill. This is where gift inter vivos cover plays a crucial role.

Protect against the seven-year risk with gift inter vivos⁵

Gift inter vivos cover provides liquidity if IHT becomes payable on a lifetime gift. If a client dies while they still owe tax, the policy pays a lump sum to cover the liability, allowing loved ones to enjoy the gift without financial worry.

As the IHT liability reduces over time, cover and premiums can also fall, making this a flexible and reassuring solution for clients wanting to reduce their estate.

It's also important to note that lifetime gifts will typically utilise the available nil-rate band if the donor dies within seven years, potentially leaving the remaining state fully exposed to IHT - so consideration should be given to protecting the nil-rate band with appropriate protection.

Whole of life cover as a long-term IHT solution

For clients with larger estates or ongoing IHT exposure, whole of life (WOL) cover offers more certainty. It pays out whenever death occurs, making sure funds are available exactly when the IHT bill comes up.

WOL cover is particularly effective when placed in trust, it keeps the proceeds outside the estate and allows beneficiaries or trustees to access funds quickly. It also offers flexibility through benefit increases linked to future IHT legislation changes and additional cover if a client’s IHT liability rises due to a gift or inheritance.

For clients focused on long-term estate planning, WOL can form the backbone of an effective IHT strategy.

Joint life second event as targeted and cost-effective planning

Not every client needs permanent cover. Joint life second event (JLSE) term insurance offers a practical alternative, especially where IHT exposure links to gifting or is expected to reduce over time.

JLSE pays out on the second death during the policy term, making sure funds are available when IHT is due. It usually costs far less than whole of life cover, making it better suited to clients with substantial assets but limited liquidity.

The role of trusts

Trusts form the heart of effective IHT planning. Placing life cover into trust helps to make sure proceeds fall outside the estate, reduce delays and provide control over how and when funds are distributed.

Premiums paid into a trust count as lifetime gifts. When they meet conditions for an exemption - such as gifts made from surplus income - they won't trigger an IHT charge. If no exemption applies, premiums count as Potentially Exempt Transfers (PETs) for bare trusts or Chargeable Lifetime Transfers (CLTs) for discretionary trusts, making the choice of trust important for advisers to consider.

Turning tax planning into positive legacy planning

Inheritance Tax doesn’t have to define the legacy your clients leave behind. With thoughtful advice, smart gifting strategies, tailored protection and robust trust planning, you can help clients transform a potential liability into a well-planned gift for future generations.

Whether you recommend whole of life cover for certainty, joint life second event cover for affordability, or gift inter vivos protection to support lifetime gifting, the right strategy will give clients confidence that their wealth passes on efficiently and tax effectively.

Important information

This information has not been approved for use with customers and is based on Aviva's interpretation of current law and legislation, and our understanding of HM Revenue & Customs (HMRC) practice as at 6 April 2026. It is provided for general information purposes only and should not be relied upon in place of legal or other professional advice. Both the law and HMRC practice will change from time to time and our interpretation may be subject to challenge by HMRC or other regulatory body. Aviva cannot act as legal adviser for you or your clients. You should always seek appropriate legal or other professional advice.

Sources:

¹ GOV.UK, UK Price Index (HPI) for April 2027, published 13 June 2017 and UK House Price Index summary: November 2025, published 21 January 2026.

² GOV.UK, Inheritance Tax - thresholds, Published 26 November 2025.

³ GOV.UK, How Inheritance Tax works: thresholds, rules and allowances, accessed April 2026.

⁴ GOV.UK, Inheritance Tax: unused pension funds and death benefits, published 26 November 2025.

⁵ GOV.UK, How Inheritance Tax works: thresholds, rules and allowances – Rules on giving gifts,  accessed April 2026.

All content is available under the Open Government Licence v3.0.