How to prepare for the Great Wealth Transfer

In a phenomenon dubbed “the great wealth transfer”, an estimated £7 trillion will pass between generations in the UK over the next 30 years, as Unbiased reports.

This transfer is already happening: around £100 billion is inherited each year in the UK. And with baby boomers (those born 1946 – 1964) currently holding over half of the nation’s wealth, this figure is expected to continue rising as they make gifts later in life and transfer their estates when they pass away.

Before money changes hands, donors and beneficiaries alike may wish to get plans in place to ensure the transfer goes smoothly. There are several factors to consider when dividing or gifting your estate, as well as when expecting to receive a large sum, and planning ahead can help you mitigate any potential taxes, disputes, or disappointments.

Read on to discover how donors and beneficiaries can prepare for the great wealth transfer.

Donors: Three ways to prepare your estate

1. Make a will and keep it up to date

Without a valid will in place, your estate will typically be divided according to the rules of intestacy.

Not only can this mean your estate isn’t distributed in line with your wishes, but it can also mean your loved ones have to wait longer to receive their inheritance.

As your financial circumstances and relationships evolve, it’s important to keep your will up to date and ensure it reflects your current wishes. For example, you might choose to remove an ex-partner from your list of beneficiaries, include a new grandchild, or add newly acquired assets to your will.

2. Understand your estate’s Inheritance Tax liability

When determining how to distribute your assets after you die, it’s often wise to factor in your estate’s Inheritance Tax (IHT) liability.

Usually, assets exceeding your nil-rate band are taxed at 40%. As of 2025/26, the nil-rate band is £325,000, and you may also be eligible for a residence nil-rate band of up to £175,000 if you leave a primary residence to a direct descendant.

By understanding your estate’s current IHT liability, you may be able to mitigate your tax bill. For example, you might consider using a trust or making lifetime gifts to reduce the size of your estate.

What’s more, knowing how much will be paid to HMRC could enable you to more accurately divide your remaining estate between beneficiaries. You can also put plans in place to cover the tax bill, such as through life insurance or setting funds aside.

Learn more: Will you have to pay Inheritance Tax?

3. Make gifts in your lifetime

Giving financial gifts in your lifetime can not only help reduce the size of your taxable estate, but it can also help your loved ones benefit from your wealth earlier in life.

For instance, if your child or grandchild is struggling to save for their first home or wedding, gifting earlier could help them reach those key milestones sooner – and whilst you’re still here to enjoy it with them.

Provided you make the gift more than seven years before you pass away, the value will typically be excluded from your estate for IHT purposes. However, none of us knows for sure how long we will live. So, if your goal is to reduce your estate’s IHT liability, it’s often worth using your tax-efficient gifting allowances.

For example, as of 2025/26, the annual exemption allows you to gift up to £3,000 a year without the value being included in your estate when you die.

Learn more: Why gifting your wealth early could have a greater impact on beneficiaries (and your tax bill.

Beneficiaries: Three ways to prepare for an inheritance

1. Avoid making assumptions about how much you will inherit

Are you expecting to inherit a loved one’s estate when they pass away?

Unless you have spoken with your loved one about their will, it can be difficult to know their true financial circumstances and intentions for dividing their assets. For instance, they may have released equity on a property you expect to inherit or have chosen to leave a significant portion of their wealth to charity.

By having an open conversation with the donor about the estate plan, you could help avoid making erroneous assumptions about your future inheritance and setting yourself up for disappointment.

2. Don’t stake your financial future on an upcoming inheritance

Even if your loved one has told you how much they have left you in their will, it may not be wise to plan your financial future around an inheritance you haven’t yet received.

Circumstances can change quickly. Your loved one could end up needing to use a large proportion of their wealth to fund their care later in life, the value of their assets could depreciate, or they could simply change their mind as relationships evolve. With life expectancy growing, you might also wait longer for your inheritance than expected.

As such, it might not be wise to rely on a future inheritance for financial stability. For example, Today’s Wills and Probate reports that 34% of UK adults depend on receiving an inheritance to fund their retirement. This could cause significant issues later in life if you don’t receive the expected level of inheritance and you haven’t made other financial preparations for retirement.

3. Plan how you will use your inheritance

Whilst it may be wise to avoid making important plans that are reliant on an inheritance, that doesn’t mean you can’t plan for how you’ll use it.

Indeed, your loved one no doubt worked hard to grow their wealth and would like to know it will be put to good use after they’ve passed away. However, if you’re unsure of the size of your inheritance, you might opt to put off planning until you receive it.

As an example, you might plan to invest a portion of your inheritance to continue growing your wealth over the long term or to gift some of it to your children. Or you might plan to renovate your home or finally take a trip you’ve always dreamed of.

Whatever you choose to do with your inheritance, the key is to ensure you use it intentionally to avoid impulse spending and regrets later in life.

Find out how we can support you with Inheritance Tax.

Get in touch

Whether you’re planning your estate and looking to mitigate an IHT bill or wondering how to use your inheritance, our Financial Planners could help you make informed decisions to support your goals.

Email us at enquiries@pen-life.co.uk or call 01904 661140.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Note that life insurance and financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.