Why Pay Inheritance Tax Twice?
How Trusts Can Help Protect Family Wealth for Future Generations
March 31st, 2026
One of the most common issues we encounter in estate planning is what can be described as “double inheritance tax.” Families spend a lifetime building wealth, property, and investments with the intention of supporting their loved ones. However, without careful planning, that wealth can be exposed to inheritance tax not just once, but potentially twice across generations.
Many people leave their estates directly to their children through a will. While this approach is simple and often feels like the natural thing to do, it means those assets become part of the children’s estates. When the children later pass away, the same assets may again be subject to Inheritance Tax, potentially at rates of up to 40%.
Over time this repeated taxation can significantly erode family wealth. Assets that were intended to provide long-term financial security for the family may gradually diminish as they pass through each generation.
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Estate planning doesn't have to be complicated. Our monthly blog covers practical tips and guidance to simplify the process, giving you peace of mind and confidence in your choices.
Estate planning doesn't have to be complicated. Our monthly blog covers practical tips and guidance to simplify the process, giving you peace of mind and confidence in your choices.
How Trusts Can Help
Trusts can provide an effective and flexible solution for families who want to protect their wealth across generations. By placing certain assets into carefully structured trusts, it may be possible to benefit children while also helping to ensure that those assets do not automatically fall into their taxable estates.
Trusts can provide several advantages. They can help ring-fence family wealth, allow trustees to manage assets responsibly, and ensure that wealth is used in accordance with the wishes of the person creating the trust. Importantly, trusts can help prevent wealth from being repeatedly exposed to inheritance tax as it passes from one generation to the next.
Trusts can provide an effective and flexible solution for families who want to protect their wealth across generations. By placing certain assets into carefully structured trusts, it may be possible to benefit children while also helping to ensure that those assets do not automatically fall into their taxable estates.
Trusts can provide several advantages. They can help ring-fence family wealth, allow trustees to manage assets responsibly, and ensure that wealth is used in accordance with the wishes of the person creating the trust. Importantly, trusts can help prevent wealth from being repeatedly exposed to inheritance tax as it passes from one generation to the next.
In addition to potential tax planning advantages, trusts can also provide protection against unforeseen circumstances such as divorce, financial difficulties, or vulnerable beneficiaries. This makes them a valuable planning tool for families who wish to safeguard wealth for the long term.
A Simple Illustration
To illustrate the potential impact of repeated taxation, consider a family estate worth £1,000,000 that passes directly to the next generation.
| Stage | Value of Wealth |
|---|---|
| Initial | Family Estate £1,000,000 |
| After possible 40% IHT in next generation | £600,000 |
| After a further potential 40% tax in following generation | £360,000 |
This simple example demonstrates how wealth can reduce significantly as it passes through multiple estates. While the exact tax outcome will depend on individual circumstances and available allowances, many families are surprised by how quickly inherited wealth can shrink over time.
Thinking Long Term
At Joshua Jacob Estate Planning we encourage families to think not only about providing for the next generation, but also about protecting wealth for future generations beyond that. Thoughtful estate planning, which may include the use of trusts, can help families maintain control, provide flexibility, and potentially reduce unnecessary tax exposure.
Every family situation is different, and professional advice is essential to ensure that any planning is appropriate and compliant with current legislation. However, one simple question often starts the conversation:
“Why allow family wealth to be taxed twice when careful planning may help protect it for future generations?”