Ensuring success in succession planning

Passing wealth on to the next generation has grabbed headlines over the past 12 months, with the changes to Inheritance Tax announced in the Autumn Budget last year making a lot of people consider how their wealth will be treated on death.

While tax is certainly a key consideration in succession planning, deeper conversations are often needed to really understand the legacy people want to leave for the next generation.

Personal circumstances to consider

Young families

For those with young families, it is important to consider who will look after inherited wealth on behalf of young children, and how that wealth can be made available when needed for things like school fees, trips, treats and higher education which are often top priorities. Beyond this, people are often concerned about the next generation receiving ‘too much too soon.’ Inherited wealth can lead to a loss of purpose or ambition in young adults, which in the context of a bereavement can have a negative impact beyond wealth being wasted or lost.

With the right planning, wealth can be made available to the next generation in a more controlled and focused way, allowing for the purchase of a property for example to be put front and centre in considering how monies should be used by the next generation.

Individuals with disabilities

For those with children and family members who have a disability, more thought is often needed as to how inherited wealth can be managed in the right way. It is key to ensure monies are made available to help and support such individuals, without creating a negative impact such as a loss of means tested benefits or leaving someone vulnerable to financial abuse. It is also important to let those people who will be managing such monies know how they should be used in the best possible way for family members who have disabilities. Well thought out succession planning can also ensure that everyone is aware of the finer details of the needs and wants of those family members who have disabilities, which are sometimes only really known by parents or very close care givers.

Marital status and divorce risks

Concerns can also arise when considering the martial status of the next generation, with divorce being a real threat to inherited wealth. Leaving monies outright to the next generation may put it at risk of being taken into consideration in a divorce, effectively eroding the family wealth. Well structured succession planning can help to mitigate the risk of inherited wealth being taken into consideration in a divorce, and can also stipulate that the next generation should enter into pre-nuptial or post-nuptial agreements to ensure that inherited wealth will be outside the scope of any financial settlement arising from a divorce.

Second marriages and modern family structures

Similarly, second marriages often raise questions as to how best to provide for a spouse, while at the same time ensuring children from a previous relationship will still benefit in the future. Well thought out succession planning will not only ensure everyone’s needs are met, but should also help to avoid disputes arising on death where children may feel disinherited due to the benefit passing to a surviving step-parent, or vice versa. Such disputes often create irreparable rifts within families, as well as leading to the erosion of family wealth due to significant costs.

Financial circumstances and asset types

Just as every family is different, everyone’s financial circumstances are also different. Understanding and taking into consideration the nature and type of assets which will be owned on death is a key part of succession planning.

Business owners and Business Property Relief

The impending changes to Business Property Relief, for example, will drastically impact business owners and has pushed the topic of succession up the boardroom agenda. Honest conversations with business owners around the future of the business in the hands of the next generation are therefore invaluable. Whether a business will continue after death or be sold will have a significant impact on the planning which should be put in place now – not least due to the planning opportunities which are available to business owners prior to the implementation of the new Inheritance Tax rules on 6 April 2026.

Similarly, for any business owners considering a sale of their business in the coming years, consideration should be given now as to how this may be structured, to take advantage of the reliefs which are currently available for qualifying business assets, which will be greatly restricted after 6 April 2026.

Farmers and Agricultural Property Relief

Farmers and landowners will also be greatly impacted by the changes to Agricultural Property Relief which are due to take effect on 6 April 2026. For many family-owned farms, this has refocused the conversation about succession planning to ensure Inheritance Tax can be mitigated as far as possible, while also ensuring the business can continue as a going concern, and that farming and non-farming family members are provided for on death.

Recently bereaved individuals

For anyone recently bereaved who is dealing with business interests and farms, it is also important to consider whether any planning can be undertaken within two years of death to capture the tax reliefs which are available now. This can often be achieved through a Deed of Variation, and while the focus will no doubt be on dealing with the administration of the estate of the deceased, the planning opportunities which may be available under the current rules should not be overlooked.

Pensions and lifetime giving

Upcoming pension rule changes

The changes to the treatment of pensions on death, which are due to come into effect in April 2027, have also had a significant impact on the discussions around succession planning. This is representing a challenge for many people, weighing up the income tax treatment of withdrawals from pensions and the continued uncertainty as to whether further changes may remove or reduce the tax-free lump sum. As the proposed changes to the rules around pensions are still in the consultation phase, it also makes it harder to plan with any certainty.

Lifetime gifts and tax implications

Speculation around possible changes to lifetime giving which may be announced in the Budget on 26 November has also brought into focus the Inheritance Tax benefits of makings gifts more than seven years prior to death. While giving away assets may seem easy, the tax rules around this are far from straightforward. On top of that, there are also a number of practical considerations to take into account when making lifetime gifts, such as whether you can afford to make the gift; whether it is appropriate to make the gift outright to the person(s) you have in mind (divorce being another big issue here); whether you can make the gift without retaining any benefit in it (which is essential for Inheritance Tax purpose but can be challenging for things like holiday homes or your main residence), and how to ensure you treat the next generation fairly if they are to benefit at different ages or different life stages.

Any jointly owned assets will also need to be given special consideration to ensure that they are held in a way which enables them to pass under the terms of your Will so that your succession planning can in turn be correctly implemented on death.

Digital and crypto assets

Ownership and inheritance considerations

With the rising popularity of digital and crypto assets, it is also important to fully understand how they can be located, accessed and transferred on death. From social media, online betting and online selling accounts to Bitcoin and Non Fungible Tokens, they all have their own nuances as to rights of ownership and how they can be inherited on death. Whether it is monetary or sentimental value which is attributed to such digital and crypto assets, a full consideration of them as part of comprehensive succession planning is key.

How can we help

Hill Dickinson’s Private Client team works with clients to fully understand their aims and objectives when it comes to succession planning. We then use a combination of wills, trusts, lifetime gifting, Lasting Powers of Attorney, and the restructuring or incorporation of companies (where appropriate) to ensure that those plans will be effectively and efficiently enacted on death.

In providing a bespoke service for every client, we ensure that planning is robust in the face of any possible disputes between family members that may arise on death, well throughout – both in the context of the legacy you wish to leave and the practicalities of implementing this on death – and provides longevity and flexibility to meet the needs of those family members and beneficiaries left behind following a death.

For a no obligation free initial consultation to discuss your succession planning, please contact Richard Marshall, a Legal Director in Hill Dickinson’s Private Client team.