Who will get your money if you don’t have children?

Who will get your money if you don’t have children?

Published: 16 Apr 2020 Updated: 13 Jun 2022

Many of our clients who don’t have children initially come to us thinking that they do not need to concern themselves with estate and Inheritance Tax planning. They are often surprised to learn that nothing could be further from the truth. Without a well-designed and structured plan, much of their wealth could end up vanishing in tax or going to relatives they don’t want it to.

If you want to choose what happens to your money when you die, there are many ways that you can ensure that your hard-earned money goes exactly where you want it to. Here, we outline some of them along with how our financial planners can help you.

Why do I need a Will?

A Will is a legal document that sets out your wishes of where you want your assets to go after your death. If you die intestate – i.e. if you die without a Will – how do you know who will end up with your money? When you don’t have any direct descendants (children or grandchildren) or a spouse, this can be a huge problem.

An example:

David and his partner Anne lived together for 20 years but never married or had any children. Their property, like that of many unmarried couples, is owned as tenants in common. David died unexpectedly and had no Will. All of David’s assets along with his share of the house will automatically go to his elderly parents, which in turn will create a bigger potential Inheritance Tax liability for them. Anne will need to sell the house in order to give David’s parents their share of the value of the property.

It’s clear that having a Will is the cornerstone of estate planning. You also need to make sure it’s up to date and your beneficiaries know where it’s kept along with all your other important documents and information about your assets. To help, we’ve created a booklet where you can easily note all of this information and keep it together in one place. It could make life much easier for your beneficiaries and the people you have chosen to handle your affairs.

Download our Important Documents log book

Why everyone needs to think about Inheritance Tax

For many people who have children, reducing the Inheritance Tax liability they will leave behind is a top priority. If you don’t have children, it would be natural to say that you don’t need to think about Inheritance Tax. However, say for example your overall estate, including your house and savings and investments, is valued at £1 million. After the nil rate band of £325,000 is deducted, the remaining £675,000 would be subject to Inheritance Tax at 40%, making the total tax liability £270,000.

Can you honestly say that you would be comfortable with this?

The residence nil rate band makes all the difference

Under the rules of the residence nil rate band, people without children, stepchildren or grandchildren miss out. The residence nil rate band is currently set at £175,000 and only people who plan to leave their family home to their children, step-children or grandchildren can use it. This nil rate band can also be transferred between spouses, which means that for the same sized estate, the Inheritance Tax liability of someone who doesn’t have children and isn’t married is likely to be significantly higher than that of a married parent or step-parent.

An example:

Ken and Keith both died in 2019 with individual estates valued at £1.1 million. Ken was widowed in 2018 and his daughter is the sole beneficiary of his estate. Keith never married and didn’t have any children. Their Inheritance Tax liabilities are:



Family home



Investments and cash savings



Other assets



Total estate value

£1.1 million

£1.1 million

Less nil rate band



Less deceased spouse’s nil rate band


Not applicable

Less both spouse’s residence nil rate bands


Not applicable

Estate value to be charged 40% Inheritance Tax



Total Inheritance Tax to pay



There is a difference of £270,000.

From this example, it’s clear that if anyone who is not married and doesn’t have children wants to reduce the amount of Inheritance Tax payable on their death, they need to think carefully about how to do this.

Spend it and enjoy it

One of the most effective ways to reduce Inheritance Tax is to not leave any wealth behind when you die. We all know the importance of saving money for the future, but for some people, it’s best to start spending it, and more importantly enjoying it, now. It goes without saying that we’re not suggesting that you encash all your assets and spend everything on a brand new Lamborghini, but with careful planning and the help of a financial planner, you can see exactly what you’ve got, what you can afford and what you need to set aside for the future.

With the use of cashflow modelling, our financial planners can forecast your future finances. They can show you in real time how much money you could have in the future and whether you are on track to achieve your goals – helping to answer questions such as ‘do I have enough money?’ and ‘when can I afford to retire?’ The model can be adjusted to allow for inflation and stress-tested to incorporate additional and perhaps unexpected costs and expenses, such as long-term care.

An example:

Susan is 55 years old. Having worked full-time and saved hard for over 30 years, she wants to move from London to a beachfront home in Cornwall, while also seeing the world. She doesn’t plan on leaving any money behind after her death, but at the same time, she wants to make sure she will have enough to live on for her whole life.

After working with a financial planner and looking at her cashflow model, it was clear that if Susan continued to work for another five years and maximised her pension contributions, this would be possible. She will have enough money to buy a house, be able to spend £10,000 a year on holidays for the following 15 years and have enough money to last her for the rest of her life. The financial planner also factored in potential fees for long-term care in her later life. The vast majority of her money would be spent during her lifetime and anything left, along with her home and possessions, would be gifted to charity on her death.

It's evident that by planning ahead, you can enjoy your hard-earned money yourself while still safe in the knowledge that you are not going to run out. Potentially, you could also end up working for less time than you might have previously imagined.

Do you want to give any of your money away?

Although you may not have any children of your own, you still may want to leave something to someone else, for example, a niece or nephew, or a godchild. Making gifts is another effective method of estate planning. In addition to showing you how much you can afford to spend, cashflow modelling can also give you an idea of how much you can afford to give away without leaving yourself short.

There are many different options surrounding making gifts, each with different rules and tax treatments. Some gifts given during your lifetime are tax-free from the time they are made. For example, gifts between married couples or civil partners, regular gifts made out of excess income or the first £3,000 gifted in each tax year. Others could create a tax bill either immediately or in the future. You can find out more about these rules in our guide to making financial gifts.

Larger gifts could also be free of Inheritance Tax if you survive for at least seven years after making them. If you die within seven years, the gift will be subject to Inheritance Tax. This is known as the seven-year rule. By giving away larger amounts during your lifetime, you could reduce your Inheritance Tax bill dramatically.

It’s also important to remember that following 2015’s pension freedoms, you can choose to pass on your pension to anybody. Money left in your pension when you die does not form part of your estate and isn’t included when your Inheritance Tax bill is calculated. If you die before you reach age 75, the pension can be passed on to a beneficiary and they won’t pay Income Tax on anything they take out of it, whether it’s a lump sum or regular income (provided the benefits are distributed within two years after death). If you die after 75, any income taken from that pension pot is taxed at the beneficiary’s highest marginal rate. For example, if they’re a basic-rate taxpayer, under the current legislation they will pay 20% in tax on the income received. Given the tax-efficiency of this method of making a gift, there is a strong argument for the money to be left in a pension scheme and passed on after death. A tax charge can, however, be applied if the pension lifetime allowance is breached. A financial planner will be able to see if passing on a pension is the best option for you and your beneficiaries.

Making financial gifts to charity

Leaving a gift to charity is a priority for many people and we often see that for clients who do not have children or a spouse, leaving a charitable legacy is a large part of their estate plan. In addition to the obvious philanthropic benefits of donating a sizable sum, there are tax benefits too.

If you donate more than 10% of your assets on death, your estate will only be charged 36% Inheritance Tax on the remainder (rather than the usual 40%). On the other hand, if you make a donation of any size during your lifetime:

  • The gift will automatically fall outside your estate and won’t be liable to Inheritance Tax even if you die within seven years of making it
  • It will reduce the overall size of your estate, potentially reducing the amount of Inheritance Tax payable on your death
  • The charity will be able to claim another 25% of the donation amount in Gift Aid
  • If you’re a higher-rate taxpayer, you can claim back the difference between the rate of tax you pay and the basic rate on the donation

An example:

Anita is a higher-rate taxpayer and has donated £10,000 to a children’s charity. The charity has claimed 25% in Gift Aid making her total donation £12,500. As a higher-rate tax payer, Anita’s tax rate is 40%. Once the basic rate of 20% on the donation is deducted from this, she can personally claim back £2,500 (£12,500 x 20%).

Before deciding whether to make any charitable gifts during your lifetime, it’s important to consider if you can afford to do so in the long term. With the use of cashflow modelling, a financial planner will be able to see if this is a viable option for you, taking all of your goals and needs into consideration, or if you would be better off leaving a gift in your Will.

Planning for later life care

Regardless of whether or not you have children, planning for later life care fees is an essential part of any financial plan. One of the common misconceptions about long-term care is that it will be funded by the State, when often this isn’t the case. There are some instances though where the NHS may fund your care fees or you may be entitled to local authority funding. The latter is means tested and if you have £23,250 or more in capital, your local authority will not provide you with financial support and you must fund your own care home fees.

The average annual cost of residential care home fees is now more than £48,000* and the cost of a nursing home can be even higher – with some charging upwards of £1,000 a week. It’s vital that these fees are considered with any long-term financial plan. Before any large sums of money are given away or spent, a financial planner will factor in the cost of care fees to ensure that you can afford to cover them and don’t leave yourself short in the future.

Our financial planners can help you

At Tilney, our financial planners understand that everyone’s circumstances are different and there is no ‘one size fits all’ approach, especially when it comes to estate planning. In order to help clients achieve the very best results, they also work alongside our specialist Technical Estate Planning team, who have the knowledge and experience required to fully appreciate the complexities of estate planning and its associated rules and regulations.

To find out how we can help you, please get in touch by emailing contact@tilney.co.uk or calling 020 7189 2400. You can also book a no-obligation initial consultation.

*Source: Knight Frank, 2020 Care Homes Trading Performance Review

Examples of how tax or tax relief may apply are based on our understanding of current tax legislation. Whether any tax will be payable, at what level it is charged and whether you qualify for tax relief will depend upon individual circumstances and may be subject to change in the future. Advice in relation to trusts and inheritance tax planning is not regulated by the Financial Conduct Authority, however, the products used in relation to trusts and to mitigate tax may be regulated.

Issued by Tilney Financial Planning Limited.


This article was previously published on Tilney prior to the launch of Evelyn Partners.