How to talk to your children about their inheritance

With more people being dragged into inheritance tax (IHT) - thanks to high house prices, frozen IHT thresholds, and new plans to include pensions in your estate from April 2027 - I want to know what I can do to protect my children now… for when I’m no longer around.

Inheritance taxes raised a record £8.2 billion in the 2024/25 tax year, up from £7.5 billion the year before¹. And while the majority of estates don’t pay inheritance tax, if the freeze of IHT thresholds continues beyond the newly extended 2028 date – now expected to stay in place until 20301 – and house prices keep climbing, more ordinary people like myself may well get caught up in this fiscal drag.

• Learn more about passing on wealth and inheritance tax here

Add that to the fact that pensions - which have historically sat outside your estate for IHT purposes - will be counted towards it for some beneficiaries from April 2027, and the potential for getting caught in the tax net increases further. The government expects the change to impact thousands of estates and raise billions in extra tax over the coming years².

The government estimates this will result in about 10,500 more estates paying Inheritance Tax than would otherwise have been the case³, raising £1.46bn a year by April 2030⁴.

• Read: Q&A the new ‘double tax’ on inherited pensions

If you’re the slightest bit unsure as to whether this might be you in years to come, it’s worth taking action now. And while thinking about your inevitable passing might not be nice to think about, let alone talk about, getting your financial ducks in a row now could help give you peace of mind. Making a will is a vital first step. And if you then talk to your children about your plans, they’ll be much better equipped to deal with the financial side of things when the time comes.

My mother passed away too young, when I was in my 30s. But before she did, we had ‘the chat’. And I certainly appreciated it. Here are some pointers to start the conversation.

1. Who pays inheritance tax

One of the first things your children might want to know is who pays inheritance tax. The job of handling the payment to the taxman falls to the ‘executor’ – someone legally recognised to deal with your estate after you die. And any tax due is paid from the estate itself. In most cases beneficiaries don’t pay IHT, although they may stand to inherit less as a result of the tax.

Of course, if your children are both the executor and beneficiary, the responsibility will lie with them. This might be something you want to discuss.

It’s also worth flagging that from April 2027, where pensions are concerned, your executor may also have to report and pay IHT on certain death benefits - a change that could come as a surprise if not planned for in advance.

2. The will itself

Go through your will with them. If you’d like your children to be the executor of your will, discuss what this means. It’s a job that requires admin and paperwork and you may feel this is too much of a burden. That’s OK, you can appoint anyone else that you trust to do the job. Whatever you decide together, make sure that you keep your will up to date and ensure you have key financial information collected together to make the executor’s job a bit easier.

Things change over time, so it’s worth reviewing your will after big life events to check that it still meets your needs. It will help your children to understand in advance what to expect.

3. Don’t forget your pension

In the Autumn 2024 Budget, Chancellor Rachel Reeves announced that from 6 April 2027, some pensions will be included in your estate for inheritance tax (IHT).

At the moment, most pensions aren’t counted towards IHT when you die. But under the new rules, pensions that haven’t been accessed at all - so, if you haven’t started drawing an income or taken a lump sum - will be counted as part of your estate if they’re passed to anyone other than your spouse or civil partner.

The responsibility for reporting and paying any inheritance tax on these pensions will fall to the executor of your estate, not the pension provider.

And while I’m talking about pensions, make sure your Expression of ish form for your pension is up to date too. While it won’t exempt those funds from inheritance tax, it helps ensure your pension savings are passed on according to your wishes. If you hold a Self-Invested Personal Pension with Fidelity you can find the Expression of Wish form here.

4. Think about what you can gift in advance

There are lots of ways to lower your inheritance tax bill by making use of gifting allowances. Have a conversation with your children to find out what their own financial needs might look like in the future. From the seven-year rule for gifts, to paying for a wedding and regular gifting from your income - there are ways to pass on your wealth while you’re still around to see your children enjoy your generosity. Read more about gifts and inheritance tax.

5. Consider taking financial advice

If you’ve got more than £100k and you want to build your wealth before passing it over and are looking for more of a personal financial recommendation - you might want to think about financial advice. Fidelity’s financial advisers welcome bringing family into the discussion. This will allow you to take yours and your children’s considerations into account. Learn more about financial advice.

Cashback offer: Get £200 to £2,000 cashback when you apply to invest a lump sum into our SIPP by 10 November 2025. Exclusions, T&Cs apply. Go to offer.

• Read: 7 steps to pass on a portfolio
• Read: 5 common IHT scenarios - from best to worst
• Read: Autumn Budget: inheritance tax and other possible changes

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