The estate planning opportunity in 2022

by | May 26, 2022

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Jessica Franks, Head of Retail Investment Products, Octopus Investments

Soaring inflation combined with frozen tax allowances is having a significant impact on inheritance tax (IHT).

Here’s some headline facts and figures.


The nil-rate band has been frozen for more than a decade at £325,000. The residence nil-rate band is staying put at £175,000. Other allowances haven’t been adjusted for inflation for more than 40 years. The annual gifts exemption of £3,000, for example, would be £12,950 were it adjusted.[1]

Meanwhile, inflation is set to reach a 40-year high[2]. The value of estates is skyrocketing, with one in 42 homes now worth more than £1 million[3].  Clients already affected by IHT can expect to have a bigger liability to plan for. And many families who might think that IHT doesn’t affect people like them will be dragged into the net.

All told, UK families are set to pay £37 billion in inheritance tax over the next five years alone.[4]


This is a huge opportunity for financial advisers to add value. But you will need to consider how uncertainty and the cost-of-living crisis might impact your approach to estate planning.

The cost-of-living crisis and estate planning

 While some start thinking about IHT as early as their fifties or sixties, the reality is that it’s common for people to think about their estate much later in life.


When a client is in their eighties or nineties, it’s less likely a lifetime gift will work as intended, because they need to survive the seven-year taper. That can lead some clients to believe they’ve left it too late to plan their estate.

This is a legitimate concern.

The simple answer would be to put planning in place sooner. But the younger a client is, the stronger their concerns are likely to be about access and control of their wealth.


Now add to that an inflationary environment where some clients will have intense anxieties about how much money they’ll need to access in later life. It’s extremely common for clients to overestimate how much they’ll need to live on in retirement. It’s no different when it comes to IHT planning.

Making lifetime gifts puts capital permanently out of reach. Even when a client is shown, with the help of cash flow modelling, that they can comfortably afford to make gifts from their estate, it’s natural for clients to feel uncertain. How long will I live? What if my needs change? Will the cost of living further increase? Will I need to pay for care fees?

These are client objections to estate planning Octopus has been helping advisers overcome for years. But they are especially relevant in the current environment.


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