Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

IN my culture, gold is an important asset, particularly for women and it is common for gold jewellery to be passed down from one generation to another as a means of keeping wealth in the family.

In the UK, cash is the more common form of inheritance. Research from Key1 shows that more than 11.6 million people in the UK have received an inheritance in the past 10 years, with the average pay-out as high as £65,000 from parents.

For those lucky enough to receive one, inheritance is an increasingly important factor in our financial plans. Discussing it ahead of time to ensure the benefits are maximised is therefore important - but death is a difficult subject to bring up with loved ones.

Knowing the range of choices allows the transfer to be as smooth as possible and can be a useful starting point.

1. Gifting allowance

Family members can give money to one another whenever they wish, but these gifts can become the subject of Inheritance Tax (IHT) in some circumstances. Currently, each of us can usually pass on £325,000 to beneficiaries after death without IHT applying (or up to £500,000 if a home is being passed on), with amounts above this level attracting potentially 40% tax.

Even gifts made before death can still sometimes fall within the scope of the tax if they are made within seven years of death - but there are valuable exceptions to this. You are entitled to an annual gifting allowance of £3,000 per year without raising the risk that a gift will fall within the scope of Inheritance Tax.

If you have not used the full gift allowance in one year, you are able to roll it over to the following year, however you are only allowed to do this once.

Not all gifts are taxable - your spouse or civil partner can receive unlimited gifts during your lifetime2.

2. Don’t forget to write a will

Writing a will is an important step to take if you want to pass on wealth to loved ones according to your wishes, but many fail to make one. According to Canada Life3, 31 million UK adults don’t have a will in place. It is a risk to not have a will as it means the law decides what your loved ones will inherit, not you.

If you don’t have a will - your family can go through undue emotional stress trying to figure out where your assets will go and who they will go to.

A solicitor can help you write a will and provide legal advice.

3. Pension power

Your pension is likely to be one of your biggest assets and leftover money in a personal pension (SIPP) can be passed onto your loved one tax efficiently. If you die before the age of 75, anything in your defined contribution pensions can be passed on to anyone you wish and the recipient won’t have to pay tax on it, as long as this is done within two years of the date of death. If death occurs after age 75, then the money withdrawn is liable to income tax at the recipient’s marginal rate.

Learn more about what happens to your pension when you die.

4. Investing for children

We have all heard the saying investing is a long-term game. In an age of instant gratification, teaching your children and grandchildren that it takes time to build wealth is an important lesson.

A Junior ISA or Junior SIPP utilises the power of compound interest - my colleague Becks Nunn wrote an interesting article about what her children taught her about investing - by using sweets her daughters understood that with patience, the fruit of one’s labour can be acquired.


1Wealth Adviser 07.09.22
2Raisin 07.22
3Canada Life 25.09.2020

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age. Junior ISAs are long term tax-efficient savings accounts for children. Withdrawals will not be possible until the child reaches age 18. A Junior ISA is only available to children under the age of 18 who are resident in the UK. It is not possible to hold both a Junior ISA and a Child Trust Fund (CTF). If your child was born between 1 September 2002 and 2 January 2011 the Government would have automatically opened a CTF on your child’s behalf. If your child holds a CTF they can transfer the investment into a Junior ISA. Please note that Fidelity does not allow for CTF transfers into a Junior ISA. Parents or guardians can open the Junior ISA and manage the account but the money belongs to the child and the investment is locked away until the child reaches 18 years old. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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