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 plans to bring most unused pensions and death benefits into scope from 6 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 £8.5 billion in the 2025/26 tax year, up from £8.2 billion the year before¹. 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 expected to remain at £325,000 until 2031 and, likewise, the residence nil-rate band is set to stay at £175,000 until April 2031 too². 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, pensions - which have often 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. 

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

IIf you’re 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 isn’t pleasant, 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’ – to the person 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 6 April 2027, where unused pensions and certain death benefits 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 and other important documents 

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. 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 sure your executor knows these exist and can access them, or that you’ve stored the relevant details securely.

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

At the moment, most pensions aren’t counted towards IHT when you die. But under the new planned rules, as of 6 April 2027 pensions that haven’t been accessed at all - so, if you haven’t started drawing an income or taken a lump sum - may 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.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). Tax treatment depends on individual circumstances and all tax rules may change in the future. Before making your decision to transfer, please read our pension transfer factsheet. This explains the things you need to consider before you transfer, including fully comparing the benefits, charges and features offered. Pensions with guaranteed benefits and advised pension transfers are not eligible for this offer. Pension rules apply. The cashback T&Cs and exit fees T&Cs are available at fidelity.co.uk/cashback. 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.