Inheritance Tax: The Squiggle Approach

Inheritance Tax planning usually starts with the tax. We start somewhere else, with what you actually want to happen to your family. This factsheet explains how we support your Inheritance Tax plans, and why we do it in the order we do.

This is the method. For the figures, the thresholds, the reliefs and the worked examples, read our Inheritance Tax Mitigation factsheet, which is where we keep all of them up to date.

Why Inheritance Tax matters more than ever

The number of families caught by Inheritance Tax is rising, and will keep rising for years to come. Three things are driving it.

First, the main tax-free thresholds are frozen. When thresholds stand still but house prices and savings do not, more estates tip over the line every year.

Second, from April 2027, unused pension funds and most pension death benefits will fall within a person's estate for Inheritance Tax purposes. For many people who have spent years treating their pension as an inheritance vehicle, that changes the maths.

Third, the reliefs for business and agricultural assets were capped in April 2026. The unlimited 100% relief that business owners and farmers previously enjoyed has been replaced by a capped allowance, with partial relief above it, and AIM-listed shares are now treated differently again.

The figures behind all three, the thresholds, the allowances, the rates and the dates they run to, are set out and kept current in our Inheritance Tax Mitigation factsheet. That is the page to check before you rely on a number. What matters here is the direction of travel: more families than ever will face a bill, and the order in which you plan has never mattered more.

Four ways to deal with Inheritance Tax

Before diving into our approach, it is worth setting out the full range of options. At the simplest level, there are four things you can do about an Inheritance Tax liability:

• Accept it. Let the estate pay the tax and pass on what is left. For some families this is the right answer, and it costs nothing to arrange.
• Reduce it. Use the reliefs and exemptions to bring the taxable estate down: gifts, allowances, the residence nil rate band, business and agricultural property, charitable giving.
• Provide for it. Leave the liability where it is and make sure there is money available to pay it, usually life cover written in trust so that it sits outside the estate. This is a regulated financial product and any decision about it must be taken with an FCA-authorised adviser.
• Defer it. Structure the estate so that the tax falls later rather than now, most obviously by using the spouse exemption on the first death.

There are many ways of achieving these. Our Inheritance Tax Mitigation factsheet outlines the main specific options in detail, lifetime gifts, the family home, pensions, trusts, and investments. No single factsheet can cover every strategy, but it provides a foundation for discussion with a specialist.

The two aims of legacy planning

When we talk about legacy planning, there are two distinct things most people want to achieve. They are related, but they are not the same:

• Protecting the inheritance. Making sure what you leave actually reaches the people you meant it for, and stays with them: not lost to a beneficiary's divorce, not lost to their bankruptcy, not redirected by a surviving spouse's remarriage, not spent on care fees, not handed to a nineteen-year-old in one lump.
• Reducing the tax. Making sure that as little as possible of what you leave goes to HMRC rather than to your family.

Both can be achieved, and for many clients we help achieve both. But here is the critical point: chasing tax efficiency before securing protection can leave your estate exposed to risks that dilute it far more than Inheritance Tax ever would.

In our experience, when clients weigh these two aims against each other, protecting the inheritance usually comes first. That is not a universal rule, and part of our job is to ask you the question rather than assume the answer.

Inheritance Tax on the part of the estate above the threshold is significant. But a child losing their inheritance to a divorce settlement, or a surviving spouse's remarriage redirecting the family home to a new partner, can remove all of it. Protection first, tax second.

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Our three-phase approach

We have developed a structured, sequenced approach to estate planning that achieves both aims without sacrificing one for the other.

Phase 1, Establish a base plan

We begin by establishing a solid base: a simple discretionary trust (a trust where the trustees decide how best to use the assets for your chosen beneficiaries, within the limits you set), either set up now as a lifetime arrangement or written into your Will to take effect on your death.

Which of those two routes is right for you matters a great deal. A trust written into your Will costs nothing to create and takes effect only on death. A trust set up during your lifetime is a chargeable lifetime transfer: if the value you put in exceeds your available nil rate band, there is an immediate Inheritance Tax charge of 20% on the excess, and the trust will also face charges on each ten-year anniversary and when capital leaves it. Lifetime trusts must be registered with HMRC's Trust Registration Service. For most people the base plan is a trust in the Will. We will tell you plainly which applies to you before anything is signed.

Your Will is drafted so that your assets are directed into that trust structure on the first death, or the second, depending on your circumstances and what gives you the best protection. From day one, your beneficiaries are protected. If you were to die while longer-term tax planning is still being explored, your wishes are respected and the inheritance is sheltered from the "what ifs" mentioned above.

This matters more than it might seem. Tax planning can take months, or even years, to settle on and put in place. If you do not yet have a base plan, the risk is that you die in that gap, before the tax planning is complete, with no trust protection at all.

Phase 2, Explore IHT mitigation

With your estate secured, you can explore, discuss and cost a comprehensive IHT plan. This might involve:

• Reviewing your pension nominations and how they interact with the April 2027 changes
• Modelling a programme of lifetime gifts, and what you can afford to give
• Setting a regular gifts-out-of-income pattern, and the records to support it
• Checking whether business or agricultural property relief applies, and how much of the relief allowance your assets already use
• Considering whether the estate should hold life cover to meet the bill
• Working out whether the residence nil rate band is safe, or at risk from the taper that applies to larger estates

Anything involving an investment or an insurance product is a regulated decision. Squiggle does not advise on those and does not recommend products. Your own adviser, or an FCA-authorised firm you choose, handles that part.

This stage typically involves an independent financial adviser or tax specialist, your own, or one we introduce you to. It takes time to get right, and the options are often complex. That is fine. Your base plan means there is no race against time.

Phase 3, Make both work together

Once your tax plan is settled, we ensure your estate planning and your IHT plan work as one. This might mean:

• Updating your Wills so they fit whatever structure has been put in place
• Making sure trust nominations, pension nominations and the Will all point the same way
• Registering any new trust with HMRC's Trust Registration Service within the deadline
• Checking that your Lasting Powers of Attorney allow your attorneys to continue what you have started, including any gifting
• Writing down for your executors what exists and why, so they are not reconstructing it later
• Agreeing when the whole thing gets reviewed again

The result is an estate plan that achieves protection and tax efficiency together, in the right order.

A hypothetical example

Imagine Richard and Catherine, both in their late sixties. Richard has recently retired and has a significant pension pot; Catherine owns a buy-to-let property in addition to their home. They have three adult children and two grandchildren.

Their estate is worth over £1.5 million between them, and they are aware that IHT is likely to be a significant issue, particularly after the April 2027 pension changes bring Richard's unused pension into scope.

They come to Squiggle wanting to "sort out their IHT problem." Our advice is to start with Phase 1: establish a Will and trust structure that protects everything for each other and for the children, regardless of what happens. Phase 1 was completed within a few weeks; timescales vary with complexity.

In Phase 2, Richard and Catherine take independent financial advice over the following months. Squiggle does not give financial advice and does not recommend financial products. Where clients do not already have an adviser, we can point them to FCA-authorised firms and they choose for themselves. Their adviser reviews Richard's pension nominations and models several options with them. They make their own decisions at their own pace, and there is no rush, because Phase 1 is already in place.

In Phase 3, Squiggle co-ordinates with the adviser to put the agreed trust arrangements in place alongside the existing Wills, update the Will trusts to fit the new structure, and ensure the TRS registration deadlines are met, and that they understand the lifetime Inheritance Tax position of anything settled during their lifetimes.

Richard and Catherine finish with a plan they understand, in an order that made sense to them, and with their protection in place before any of the tax work started. Outcomes depend on individual circumstances, asset values, and the law at the time.

Common mistakes people make

Starting with the tax. Many people arrive at estate planning having read something about IHT-efficient investments or having been sold a product designed to reduce their estate. Some of these work; some do not. But all of them are Phase 2 and Phase 3 thinking applied before Phase 1 is in place. The right order matters.

Waiting until it feels urgent. Many families come to Squiggle because someone has been diagnosed with an illness, or has just received a large inheritance, or has just read about the pension changes. Acting under time pressure narrows your options significantly. Earlier is almost always better.

Making gifts without advice. Gifts that could reduce your estate for IHT may trigger other problems, capital gains tax on an asset that has risen in value, for example, or a gift that is challenged if you need care within a few years. Always seek advice before making significant gifts.

Treating the pension as untouchable. Before April 2027, many people were told not to touch their pension because it was IHT-free. After April 2027, that advice needs revisiting. The right pension withdrawal strategy has changed for many people.

Assuming the nil rate band protects them. The thresholds sound generous until you add up a house, a pension and a lifetime of savings, and in the South East in particular they are passed far more often than people expect. The current figures, and how a couple can combine their allowances, are in our Inheritance Tax Mitigation factsheet.

Step-by-step: how to get started

1. Book a free call. Twenty minutes, no charge, no obligation. You tell us what you have and what worries you.
2. We work out roughly where you stand. A first estimate of the Inheritance Tax position and, more importantly, where your family is exposed if nothing changes. Our IHT Calculator gives you a rough figure before you even call.
3. We agree the base plan. Wills, the right trust structure, Lasting Powers of Attorney, and how assets are owned. This is Phase 1, and it is usually a matter of weeks.
4. You take financial advice, if you need it. Your own adviser, or an FCA-authorised firm you choose. This is Phase 2, and it takes as long as it takes.
5. We fit the two together. Wills updated, nominations aligned, trusts registered. Phase 3.
6. We review it. Every two or three years, and after anything significant: a death, a marriage, a divorce, a business sale, a house move, a change in the law.

Nothing at step one costs anything, and nothing commits you to anything.

Questions? Book a free call

Pick a time that suits you and your local Squiggle consultant will call you. No charge, no obligation. Book a call or call 01233 659 796.

Talk to Squiggle: 01233 659 796 | hello@squiggleconsult.co.uk | www.squiggleconsult.co.uk | Book a free call: meet.squiggleconsult.co.uk

This factsheet is general information for England and Wales, not legal, tax or financial advice. Worked examples are hypothetical and for illustration only. Last reviewed: August 2026.