How to talk to your children about their inheritance

With more people being drawn into inheritance tax (IHT) - thanks to high house prices, frozen IHT thresholds, and changes that will bring most unused pensions and death benefits into scope for deaths on or after 6 April 2027 - you may be wondering what you can do to help your children prepare financially for when you’re no longer around.

Inheritance tax receipts reached a record £8.5 billion in the 2025/26 tax year. And while the majority of estates don’t pay inheritance tax, frozen thresholds mean more estates could be pulled into the tax net over time. The nil-rate band is fixed at £325,000 and the residence nil-rate band at £175,000 until 5 April 2031². Even if house prices climb slowly, more ordinary people like myself may well get caught up in this fiscal drag.

• Learn more about passing on wealth and inheritance tax here

On top of that, for deaths on or after 6 April 2027 most unused pension funds and pension death benefits will be included when calculating the value of an estate for IHT purposes. Exemptions and exclusions may apply, but the change could increase the number of estates with an IHT liability.

• Read: 9 ways to protect your pension from IHT changes 

If you’re unsure as to whether this might be you in years to come, it’s worth taking action now. Although thinking about what happens after you die may feel uncomfortable, getting your financial affairs in order could give you and your family greater 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.

Here are some pointers to start the conversation

1. Who deals with inheritance tax

One of the first things your children might want to know is who deals with IHT. Responsibility for administering the estate normally falls to the personal representatives. These may be the executors named in your will or, where there is no valid will, administrators appointed to deal with the estate.

IHT is normally paid from the estate before its assets are distributed. Beneficiaries will therefore usually receive a smaller inheritance rather than paying the estate’s IHT bill personally, although different rules can apply to certain lifetime gifts and trusts.

If your child is both an executor and a beneficiary, they may be responsible for administering the estate as well as receiving part of it. This is something you may want to discuss in advance.

From 6 April 2027, for deaths on or after that date, personal representatives will also generally be responsible for reporting relevant unused pension funds and pension death benefits and paying any IHT due on them. Once pension benefits vest in a beneficiary, that beneficiary may also become jointly and severally liable for the IHT attributable to those benefits. In some circumstances, personal representatives or beneficiaries may ask the pension scheme administrator to withhold funds or pay IHT directly to HMRC, which would reduce the pension benefits paid. 

2. Your will and other important documents 

Go through your will with them. If you’d like one or more of your children to act as executors, 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 someone else that you trust to do the job. Whatever you decide, 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. And then make sure your children know where key documents are stored.

It’s also worth considering your digital assets – such as online accounts, subscriptions and social media profiles. Make a secure record of your digital assets and leave appropriate instructions for dealing with them. Where platforms offer legacy-contact or account-management settings, consider using them. Avoid including passwords in your will, as a will may become a public document after probate.

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.

Writing up your will doesn’t need to cost the earth. In fact, every year ‘Free Wills Month’ gives people aged 55 and over the chance to have a simple will written or updated free of charge by participating solicitors in selected locations across the UK. The initiative is supported by a group of well-known charities.

3. Don’t forget your pension

At the moment, most pensions aren’t counted towards IHT when you die. For deaths on or after 6 April 2027 pensions are going to 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 Wish form for your pension is up to date too (this is where you can nominate your beneficiaries). 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.

Learn more about inheritance tax and the 7-year rule in the video below.

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