Estate planning glossary

Annual exempt amount

The slice of capital gains you can realise each tax year before Capital Gains Tax applies, currently £3,000 per person. It cannot be carried forward.

Domicile

Your long-term permanent home in the eyes of the tax system, often inherited from a parent and distinct from where you currently live. It heavily influences how your worldwide estate is taxed.

Double-tax treaty

An agreement between two countries that prevents the same income, gain or estate being taxed twice, usually through credits or exemptions that must be claimed correctly.

Intestacy

What happens when someone dies without a valid will. A fixed legal order decides who inherits, which often does not match what the person would have wanted.

Lasting Power of Attorney (LPA)

A legal document letting people you trust act for you if you lose the ability to manage your own affairs. Two types exist, property & financial affairs, and health & welfare, both registered with the Office of the Public Guardian.

Nil-rate band

The amount of your estate taxed at 0% for Inheritance Tax, £325,000 per person, frozen until April 2030. Anything above your combined allowances is taxed at 40%.

Pension funds within the estate (from April 2027)

Most unused pension funds and death benefits, which from 6 April 2027 are expected to count towards your estate for IHT rather than sitting outside it.

Potentially exempt transfer (the 7-year rule)

A lifetime gift that becomes free of Inheritance Tax if you survive seven years from making it. Taper relief reduces the tax due if you die between years three and seven.

Relevant property regime

The tax framework applying to many trusts, which can carry entry charges, ten-yearly charges and exit charges. It is the main reason trust tax needs specialist modelling.

Residence nil-rate band (RNRB)

An extra allowance of up to £175,000 when your main home passes to direct descendants such as children or grandchildren. It tapers away for estates worth more than £2,000,000.

Settlor, trustee and beneficiary

The settlor puts assets into the trust, the trustees manage them under the trust's rules, and the beneficiaries are the people the trust is there to benefit. One person can hold more than one role.

Taper relief

A reduction in the IHT due on a gift made between three and seven years before death. It reduces the tax on the gift, not the gift's value itself.

Tax residency

Where you are treated as resident for tax in a given year, largely based on time spent in a country and your ties to it. You can be resident in more than one place at once.

Trust

A legal arrangement where assets are held by trustees for the benefit of others. Used to protect assets, provide for vulnerable or young beneficiaries, or control the timing of an inheritance; some trusts have their own tax treatment.

These definitions are general information about how estate planning works in England & Wales, not personal legal or financial advice. The right approach depends on your circumstances. See our services or FAQ for more.