This practical case study explores estate planning strategies. Using a client scenario, it demonstrates how advisers can help clients reduce potential IHT liabilities through pension withdrawals, regular gifting from income and tax-efficient intergenerational wealth planning, while maintaining long-term financial security.
Planning for the inclusion of defined contribution schemes in the IHT net
It is fair to say that the policy landscape for pensions and inheritance tax (IHT) is undergoing a significant shift. From 6 April 2027, unused defined contribution (DC) pension funds are set to be brought within the scope of a client’s estate for IHT purposes. This marks a fundamental change to the long-standing position that DC pensions, in most circumstances, sit outside the estate and pass tax efficiently to beneficiaries.
This is a pivotal moment for financial advisers. Pension wealth can no longer be viewed purely as a tax-advantaged succession vehicle. Instead, it must be integrated within holistic estate planning. The key consideration is no longer how to preserve pension funds indefinitely, but how to deploy them intelligently during the client’s lifetime to mitigate IHT exposure while maintaining financial security.
This case study examines how lifetime financial planning – particularly structured, regular gifting from pension income – can play a central role in managing a potential IHT liability.
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