Thinking about what you’ll leave behind is not just about money. For a lot of people, it’s about creating options for their children and grandchildren, supporting causes they care about, or making sure that a lifetime of work is passed on efficiently rather than lost to tax.
The challenge is knowing when to start this conversation.
If you start early, you might give away too much money before you know what you will need in the future. If you leave it late, some inheritance tax planning options may no longer be available to you. In our experience, a good time to start this conversation is when you are financially independent but still have time to plan, although the right moment will depend on your individual circumstances. The foundation for making these decisions should be based on cash flow modelling.
What is cash flow modelling?
Cash flow modelling helps individuals and families understand how their wealth will change over time. It does this by forecasting income, expenditure, inflation, investment returns, and future liabilities. This makes it possible to answer the question: “How much money do I need and how much can I give away?” Without this understanding, giving money away can be a guess.
Some people are too cautious. They may hold on to too much money, which can increase the inheritance tax (IHT) bill on their estate. Others give away too much money too soon and then find themselves struggling financially later in life. A good cash flow model helps avoid these problems. It creates a framework for understanding what assets you need to keep to support your lifestyle in retirement and what money you can give away.
Long-term care
One important thing to consider is long-term care. As people live longer, they are more likely to need care in life. This can be expensive especially if you need care for a significant amount of time – costs can easily run into tens of thousands of pounds each year, with the average annual UK residential care cost in 2026 sitting at £67,496 (Carehome.co.uk). This is why estate planning should not just focus on reducing inheritance tax, and should also consider protecting your dignity, independence, and quality of life.
Modelling different scenarios
Before giving away amounts of money you should test your future finances against different scenarios, such as living longer, poor investment returns, higher inflation, and increasing care costs. Cash flow modelling makes these scenarios clear and measurable. Once you are confident that you have assets you can consider giving away money.
How could you give away money?
One common approach is to give away capital. Under UK inheritance tax rules, gifts made from capital are usually considered Potentially Exempt Transfers. If the person making the gift lives for seven years after it is made, then the value usually does not count towards their estate for inheritance tax purposes. However, timing is important. Leaving discussions about giving away money until later in life may reduce the chance of surviving the seven-year period, which can limit the effectiveness of the strategy.
As well as giving away capital, many people overlook the power of giving out of regular income. Gifts made from income can immediately fall outside the estate for inheritance tax purposes without the need to survive seven years as long as certain conditions are met. One such condition is that the gifts must be part of a pattern that comes from income, rather than capital, and leave the donor with enough income to maintain their standard of living.
Making gifts too early without proper planning can also compromise your future financial security. This is where cash flow modelling is invaluable. Instead of asking “How much can I afford to give away today?” you should ask “How much can I give away while still maintaining long-term financial security?”
The benefits of gifting
For retirees with pension income or investment income this can create significant opportunities. Helping children with school fees, contributing to property deposits for grandchildren, or funding savings plans can all be done in a tax-efficient way. The key is documentation and consistency.
HMRC will expect records showing that gifts were genuinely made from excess income and did not reduce the donor’s standard of living. Again, this is where detailed planning and cash flow analysis are essential. They provide evidence that the gifts are sustainable and affordable over the long term. Getting advice from an independent financial adviser can also help you ensure you gift the right way.
The balance of living well and planning ahead
Ultimately, good estate planning is about balance. It is not about rushing to transfer wealth as early as possible, nor is it about avoiding difficult conversations until they become urgent. It is about achieving balance and using your wealth purposefully.
In a lot of cases, the ideal time to start thinking seriously about what you will leave behind is when retirement is visible and financial priorities begin to shift. At this stage, you might be in a position to assess what wealth is truly required for your own future and what may be surplus. Planning early does not necessarily mean acting. The first step is simply understanding the numbers. A constructed cash flow model can provide reassurance that retirement goals remain achievable while also highlighting opportunities to support future generations more efficiently.
For families this clarity changes the conversation entirely from viewing estate planning purely as a tax exercise. Towards retirement, it becomes part of a broader financial strategy focused on using wealth purposefully during life as well. Effective plans are rarely built around extremes. They are built around confidence: confidence that enough has been retained for lifestyle needs and long-term care confidence that giving decisions are sustainable and confidence that opportunities are not being missed through delay.
So, when should you start thinking about what you will leave behind? Sooner than most people actually do, but only once you fully understand what you may still need for yourself first.
If this article has raised any questions for you, feel free to get in touch!
Written by Liviu Ratoi, Independent Financial Adviser at Flying Colours
Please note:
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Cashflow planning is used as a tool to help illustrate how income, expenditure, and financial arrangements may interact over time. Cashflow planning itself is not a regulated activity. However, where it forms part of regulated financial advice, that advice is regulated by the Financial Conduct Authority.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing.
Planning horizons are illustrative and will vary based on individual health, circumstances, and life expectancy.