How to Protect a £2M+ Estate from Inheritance Tax
Author: Ray L Best
1 October 2025
Inheritance Tax (IHT) is often described as a "voluntary tax" because, with proper planning, much of it can be mitigated. For families with estates over £2M, however, the stakes are particularly high. Without action, up to 40% of your estate could be lost to HMRC.
What is Inheritance Tax?
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Charged at 40% on estates above the nil-rate band (£325,000, plus any residence nil-rate band if applicable).
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Estates above £2M lose the residence nil-rate band taper relief, meaning the full £175,000 allowance can be wiped out.
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Business or agricultural relief may apply but needs proper structuring.
Key Strategies to Protect Your Estate
1. Use Trusts Wisely
Trusts can move assets outside your estate while allowing you to retain some control. Different types (discretionary, interest in possession, family trusts) serve different purposes.
2. Structured Lifetime Gifting
Gifts made more than 7 years before death can be fully exempt. Planning gifting - not last-minute handouts - is vital.
3. Life Insurance in Trust
Policies written in trust can provide liquidity for IHT without swelling the taxable estate.
4. Family Agreements
Clear documentation of how wealth is to passed reduces disputes and ensures tax-efficient transfers.
For high-value estates, the difference between acting and delaying can be millions of pounds.
Early, tailored planning is the key.
Case Study Example
A £5M estate faced an estimated £2M liability. Through discretionary trusts, structured gifts, and insurance, liability was reduced by 40%.