Estate Planning for Parents UK (2026): Wills, Trusts, LPAs & IHT for Families

For parents of minor children (under 18), estate planning has urgent priorities that adults without dependent children do not face: (1) Who will care for the children if both parents die? Without a valid will naming a guardian, the decision falls to the courts — a lengthy and distressing process for everyone including the children. A will is the only legally recognised way to name your preferred guardian; (2) How will the children's inheritance be managed? A child under 18 cannot hold or manage property or significant financial assets legally. Without a trust in the will, inherited assets must be managed by the Public Trustee or family court until the child turns 18 — administratively cumbersome and potentially costly; (3) What happens to the family home? Without planning, the family home may need to be sold to distribute the estate fairly — particularly where the deceased had children from a previous relationship, or where there are competing claims. A property protection trust or specific will provisions can prevent this; (4) Life insurance: parents with mortgages, young children, and financial dependants face the largest protection gap of any demographic. Life insurance in trust is one of the most cost-effective estate planning tools available — the payout sits outside the estate (avoiding IHT) and is immediately available to the surviving family without probate; (5) Inheritance tax: parents accumulating property and savings over a 20–30 year career face a significant IHT exposure on death. The residence nil-rate band (RNRB) — up to £175,000 in addition to the £325,000 NRB — specifically rewards passing the family home to direct descendants (children, stepchildren, grandchildren). For married parents, the transferable RNRB means up to £1 million can pass to direct descendants free of IHT on the second death; (6) LPAs: if one parent loses capacity, the other needs the legal authority to manage the family's finances without Court of Protection interference. Both parents should register both a P&FA LPA and an H&W LPA.

Appointing a guardian for your minor children is one of the most important things a parent can do in a will: (1) What a guardian does: a guardian takes on parental responsibility for a child if both parents die while the child is still under 18. The guardian provides a home, makes day-to-day decisions, and cares for the child's welfare. A guardian is not automatically the person who manages the child's money — that is the trustee's role (see trust provisions below); (2) How to appoint a guardian — in the will: the will is the only legally effective way to appoint a preferred guardian. Under the Children Act 1989 s.5, a parent with parental responsibility can appoint a guardian in a will. If both parents die and no guardian has been appointed in a will, the court appoints one under CA 1989 s.5(4) — the court will take the children's best interests into account, but the process is uncertain, delayed, and can result in a different outcome from what the parents would have chosen; (3) Who can be a guardian: anyone you trust to care for your children. Common choices: the other parent's siblings; your own siblings; a close family friend. Consider: (a) their age and health — will they still be able to care for the children in 10–15 years? (b) their parenting values and lifestyle; (c) whether they already have children of their own; (d) whether they live near the children's school and friends; (e) financial position — the estate funds cover the child's costs, but the guardian's life should not be impossible; (4) Named vs unnamed guardian: you can name a specific person or you can name them as a fallback if a named first choice cannot act. Consider naming a reserve guardian; (5) Have the conversation first: always discuss your intention with the proposed guardian before naming them in the will. A guardian has a right to disclaim the appointment. A guardian who is unprepared may also not provide the best care; (6) Parental responsibility: unmarried fathers without parental responsibility (not married; not named on birth certificate; no parental responsibility agreement) cannot appoint a guardian in a will unless they have parental responsibility. If in doubt, seek legal advice.

Without a trust in the will, a child who inherits assets at the age of 18 receives everything in one lump sum — which may not be appropriate. Well-drafted trust provisions in a will can protect children's inheritances: (1) Default trust age (bare trust at 18): if a will leaves assets to a child without a trust, a bare trust automatically holds the assets until the child turns 18. The child can demand the assets at 18 as of right. For most children, this is too young for significant wealth; (2) Discretionary trust for minor children (trust for bereaved minors — IHTA 1984 s.71A): where both parents have died and the children are minors, a 'bereaved minor's trust' holds assets for the child until age 18 with no periodic or exit charges. This is the standard trust used in mirror wills for parents. The trustees have discretion to apply income and capital for the child's education, maintenance, and benefit before age 18; the child receives the trust fund at 18. No IHT charge on the trust during the period; (3) Age 25 trust (s.71D trust): if you want the children to receive the trust fund at age 25 rather than 18, a s.71D age-25 trust is available but there is an exit charge when the child receives the fund between ages 18 and 25 (maximum 4.2% if held until 25). The trustees still have discretion to advance capital for education, emergency, or housing before 25; (4) Discretionary trust for flexibility (where ages or needs are unknown): a fully discretionary trust gives the trustees the widest possible power to benefit multiple children in different proportions, add future beneficiaries (including grandchildren), and respond to individual needs. More flexible but: subject to periodic (10-year) charges at 6% of value above the nil-rate band; requires trustees to exercise genuine discretion; (5) Trustee choice: the guardian and the trustee can be (and often should be) different people. The trustee controls the money; the guardian makes welfare decisions. Keeping them separate provides a useful check on each other; (6) Professional trustee for large estates: for estates where children will inherit significant assets (property, business interests), a professional trustee alongside family trustees adds expertise and continuity.

The Residence Nil-Rate Band (RNRB) is a specific IHT allowance that rewards passing the family home to direct descendants: (1) How much: up to £175,000 per person in 2026/27 (frozen since 2020/21). Combined with the standard NRB of £325,000, a single parent can pass up to £500,000 free of IHT if they leave the home to a direct descendant; (2) For married/civil partnership parents: on the first death, the unused RNRB transfers to the surviving spouse. On the second death, both partners' full RNRBs are available — up to £350,000 RNRB + £650,000 NRB = up to £1,000,000 free of IHT (in addition to the spouse exemption on first death, meaning the first death is typically fully exempt). This is why many married parents pass everything to each other on first death and rely on the combined nil-rate bands on second death; (3) Which descendants qualify: children (biological, adopted, step-children — FA 2016 extended RNRB to include stepchildren); grandchildren; great-grandchildren. A child's spouse or cohabitant does NOT qualify directly — but the property can be held in a trust for the child; (4) The property must be part of the estate: the RNRB only applies where the deceased's main residence (or a previously owned residence) is left to direct descendants. If the home is given away during the deceased's lifetime (gifted to children; put into trust), the RNRB may be reduced or lost; (5) Downsizing addition: if the deceased downsized or sold their home after 8 July 2015, the RNRB is not entirely lost — a 'downsizing addition' preserves it to the extent of the proceeds passed to direct descendants; (6) Tapering above £2 million: the RNRB is reduced by £1 for every £2 that the total estate exceeds £2 million. For estates over £2.35 million, the RNRB is fully tapered away.

Beyond the will and trust, parents should consider two additional essential planning tools: (1) Life insurance in trust — why the trust matters: many parents have life insurance policies but have not written them in trust. Without a trust: the life insurance payout forms part of the estate → it is subject to IHT (if the estate is above the threshold) → it cannot be paid until probate is granted (which takes 4–16 weeks minimum, often months). Written in trust: the payout sits outside the estate → it is NOT subject to IHT → it can be paid by the insurer directly to the trustees immediately after death (no probate required) → the trustees use it for the family's immediate needs (mortgage, childcare, living costs); (2) Types of life insurance trust: absolute trust (most common for joint policies — names specific beneficiaries; irrevocable); discretionary trust (trustees decide who benefits from a named class — more flexible; useful where children's needs are uncertain; ensures sidestepping the insurance company's default payable-to-estate rules); (3) Amount of cover: a common rule of thumb is 10× gross salary for the primary earner, or enough to clear the mortgage plus provide income replacement for 10–15 years. Review annually or after each major life event; (4) LPA for both parents: if one parent becomes incapacitated, the other cannot simply take over the incapacitated parent's financial affairs. Without a registered P&FA LPA: a joint mortgage may not be manageable; a sole-owned investment account cannot be accessed; a business interest may become unmanageable. Both parents should register: (a) a Property and Financial Affairs LPA; (b) a Health and Welfare LPA. Cost: £82 per LPA per person (2026/27 OPG fee); registration time: 4–16 weeks; (5) Reviewing and updating: review all estate planning after: the birth of each child; purchasing a new home; significant increase in assets; divorce or separation; a child reaching 18 (change the guardian provision); a change in the law (pension IHT changes from April 2027 — a significant new planning consideration).