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.

FEAR and greed are widely acknowledged as the two opposing emotions that drive market volatility. But I was reminded when talking to a relationship manager in the Wealth Management team the other day, that it’s possible for fear and greed to come from an altruistic place. Especially when customers are looking to pass their wealth on to their loved ones.

Research shows that 43% of the UK population expect to receive an inheritance one day - rising to almost 65% of younger adults1. So, it’s no wonder why people feel pressure to do right by their families.

But market movements are only one part of the passing on wealth equation. Here are six ways that will help give you peace of mind when passing on wealth and so planning your financial legacy.

1. Think about talking to a financial adviser

As you want to pass on as much of your wealth as possible, without impacting your own day-to-day needs and expenses, you may want to consider taking financial advice to get clarity over your options. At Fidelity, the initial discussion to see if advice is right for you is free (there’s no obligation), so you have nothing to lose. More on financial advice here.

2. Learn about inheritance tax (IHT)

IHT is a tax placed on your estate (such as property, possessions and money) when you die. It’s usually charged at 40% on anything above the nil-rate band (NRB) allowance. Incorporating this into your plans early can leave you with more money for your loved ones, so it’s worth thinking about. Particularly as it’s recently been reported that UK residents have made nearly 32,000 reclaims for overpaid inheritance tax in past six years2. Making financial gifts, identifying other ways to provide an income in retirement, or taking out a life insurance policy are just a few of the ways which can help manage this.

3. Get to grips with CGT vs IHT

Capital Gains Tax (CGT) is a tax on profit, while IHT is a tax on the value of your estate when you die. Gifting an asset during your lifetime - while possible - may have expensive tax consequences. Equally, paying CGT now to save IHT later may not make financial sense. If you’re planning on making a large gift, you might want to seek financial advice.

4. Don’t forget your pension

Your pension sits outside your estate, so it’s a tax-efficient way of providing a financial security blanket for your loved ones. Make sure your ‘Expression of Wish’ form is up to date, as this lets scheme administrators know who you’d like them to pay your pension benefits to. You can read more about IHT and your pension here.

5. Be aware of the Money Purchase Annual Allowance (MPAA)

As soon as you take an income from your pension you trigger the MPAA. This means any future contributions into your pension are limited to £4,000 a year. This is important if you’re thinking about phasing your retirement to work part time, as it effects the amount you can continue to save into your pension, and eventually what you end up leaving behind for your nearest and dearest.

6. Try not to react in the moment

When the value of your investment falls, it’s tempting to make knee-jerk decisions in a bid to protect your savings. Don’t allow fear to skew your decision-making. History shows that markets can - and have - recovered.


1 Research conducted by Opinium between 28 June and 2 July 2021 amongst a nationally representative sample of 2,000 UK adults
2 Freedom of information Act request to HMRC

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. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). 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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