Modern families, inheritance planning and when you need to pay Inheritance Tax

November 2021

Modern families, inheritance planning and when you need to pay Inheritance Tax

Life has changed dramatically in the last few decades. What was once a ‘typical family’ is no longer the only way of being a family unit. From being married and having 2.4 children, our modern families range from two adults with no children to extended families with stepchildren and co-parenting – marriage optional in all cases. Yet what remains unchanged is how Inheritance Tax works. Inheritance Tax rules have not moved with the times as fast as our family lives have. So when do you need to pay Inheritance Tax? Read on to find out. As ever, if you want a personalised assessment of your Inheritance Tax requirements, speak to one of our independent financial advisers at  

When is inheritance automatic?

There are a few simple rules for when inheritance is automatic – in other words, your spouse, civil partner and children can benefit even if you do not have a will. This applies when you:

  • are married
  • are in a civil partnership
  • have biological or adopted children.

There are certain rules for how much your beneficiaries can inherit. While they can be complex and depend on individual circumstances, they broadly include the following:

  • The surviving spouse/civil partner will inherit all assets up to the current threshold of £325,000. Should your assets be below this, then no Inheritance Tax is levied.
  • If you have no surviving spouse/civil partner, then all assets up to that threshold will be distributed equally amongst your children. If there are no surviving children, then they will go to any grandchildren, great-grandchildren, etc. Again, your beneficiaries will not have to pay Inheritance Tax in such instances.

When will your beneficiaries have to pay Inheritance Tax?

There are two main instances when you need to consider Inheritance Tax and whether your beneficiaries may need to pay it:

  1. Your assets are worth more than £325,000. If this is the case, it makes no difference whether or not you are married or in a civil partnership. Your beneficiaries will have to pay Inheritance Tax at the current rate of 40% on anything above that threshold. There are, however, ways to reduce this – our article on Inheritance Tax rules gives an overview of what these are.
  2. You are not married or in a civil partnership, or you have stepchildren. If you are not married to or in a civil partnership with your partner, they do not automatically inherit anything. In other words, if you are cohabiting with your partner, they do not have a legal claim on any inheritance without a will in place. Similarly, only biological and adopted children are able to inherit your assets. If you have stepchildren, they will not automatically qualify unless you have legally adopted them.  

When you have no will in place

If you do not have a will in place, you are intestate. In this case, the government’s intestacy rules will apply. Broadly, the first £325,000 of any assets will go to your legal spouse, with the remainder distributed equally amongst any children (biological or adopted). This means that if you are not married or in a civil partnership but have children, then your assets pass directly to your children. In such instances, your legal spouse will not inherit anything.

Where there are no direct descendants – in other words children or grandchildren – then the Crown will inherit your assets.

Some useful terms to keep in mind

Inheritance Tax rules use specific terms that not everyone may be familiar with. The key ones used here that are helpful to know are:

  • Assets. Your assets include property, cash, valuables (such as art, vehicles or jewellery), business interests and stocks and shares. Pensions do not come under Inheritance Tax rules.
  • Intestate. If you do not have a will when you die, you are intestate.
  • Intestacy. If you are intestate, then the government’s rules on allocating your assets will apply – known as the intestacy rules. The Citizen’s Advice Bureau sets out these rules in more detail.
  • Civil partnership. This is when two people who are not related register a legal relationship. It applies to both same-sex and opposite-sex couples.  

We can help you untangle Inheritance Tax

There is little doubt that Inheritance Tax rules can be confusing. Legal partnerships, marriage, children, stepchildren, single, no matter what your family unit looks like, it is worth putting plans into place for your inheritance. At Plutus Wealth we can take some of that pressure off and set things up so that your assets are safe, and your beneficiaries do not have to pay unnecessarily high amounts of Inheritance Tax. Start by talking to one of our independent financial advisers by calling us on 020 7871 5200 or emailing us at


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