At 50, most London homeowners have accumulated a taxable estate without planning for one

Step one -- the estate inventory

Before any planning can happen, you need a clear picture of what you own. An estate inventory should list: all property (residential and investment) with current valuations and outstanding mortgage balances; all bank and savings accounts; all investments, ISAs, and share portfolios; all life insurance policies (noting whether written in trust); all pension funds and their current transfer values; any business interests; and any other significant assets.

Liabilities reduce the estate: outstanding mortgages, secured loans, credit card balances, and outstanding tax liabilities should all be listed and deducted. The resulting net figure is your gross taxable estate for IHT purposes before allowances.

For most London homeowners over 50, this exercise produces a number that is larger -- sometimes significantly larger -- than they expected. Property purchased in the 1990s or early 2000s may have tripled or quadrupled in value. Combined with pension funds and ISAs accumulated over a working life, estates of £1,000,000-£3,000,000 are common for people who do not consider themselves wealthy.

Review your will

If you do not have a will, make one immediately. If you do have one, review it critically. When was it last updated? Do the executors named still have capacity and are they still willing? Are the beneficiaries still appropriate? If you have divorced and remarried, does the will reflect your current family structure? If the will predates the introduction of the RNRB in 2017, the IHT provisions may be outdated.

For couples, consider whether a simple mirror will is still appropriate or whether a life interest trust should be incorporated to protect the estate on the second death. For people with children from previous relationships, the adequacy of protection for each set of children needs careful review.

A will review with a specialist typically takes one to two hours and produces a clear picture of whether the existing document is adequate. Our estate planning review service includes a will review as a standard element.

Lasting powers of attorney

If you do not have both a property and financial affairs LPA and a health and welfare LPA, the priority action is to create them now. The registration process currently takes approximately 20 weeks. A health event at 60 or 65 is not uncommon -- the window for creating LPAs while you still have capacity may be shorter than you expect.

If you have existing LPAs, check that the attorneys named are still appropriate, willing, and able to act. An attorney who is themselves elderly, unwell, or estranged from you may not be the right person to manage your affairs. Updating attorneys requires creating a new LPA -- the existing one cannot simply be amended.

Pension nominations -- the overlooked asset

Pensions are typically outside the estate for IHT purposes -- making them one of the most tax-efficient assets to pass to the next generation. But from April 2027, most pension funds will be brought within the scope of IHT under changes announced in the Autumn Budget 2024. If you have a significant pension fund, the planning implications of this change are material and require specialist advice before 2027.

Regardless of the IHT position, pension nominations must be kept current. A nomination naming a former spouse, a deceased parent, or simply no one is a significant problem. Contact your pension provider and request a copy of your current nomination form. If it is outdated, update it now.

Gifting strategies to reduce IHT

Regular gifting from surplus income and capital can significantly reduce an estate over time, without the seven-year clock applying to all gifts. The annual exemption of £3,000 per person per year allows £6,000 per couple to leave the estate free from IHT each year (with one year's unused exemption carried forward). Small gifts of up to £250 per person to any number of recipients are immediately exempt.

More significantly, the normal expenditure out of income exemption under s.21 IHTA 1984 allows regular gifts from income -- gifts that are habitual, made from surplus income after meeting normal living expenses, and that do not reduce the donor's standard of living -- to be immediately exempt from IHT without the seven-year rule. For someone with a large pension income, structured annual payments to children can remove substantial sums from the estate over time.

Larger one-off gifts are potentially exempt transfers (PETs) and fall outside the estate only if the donor survives seven years. If death occurs within seven years, the gift is brought back into the estate, though taper relief applies after three years. Anyone considering large gifts as an IHT strategy should consider term insurance on their own life to fund any IHT that would arise from the gift if they died within seven years.

Estate Planning Checklist for Londoners Over 50 -- common questions