Pets and PETs: 4 inheritance quirks you didn’t know about

For most people, estate planning begins and ends with drafting a will. While this is certainly the foundation of an estate plan, it only scratches the surface of what is possible – and often necessary – when managing complicated, high net worth estates.

When you factor in several pension pots, business assets, property, and more, estate planning can quickly become complex – and there are some rules and opportunities you may never have thought about.

Here are four lesser-known aspects of estate planning and Inheritance Tax (IHT) that you may not be aware of.

1. Making financial provisions for your pets in your will

It’s a common question, perhaps presented with a joking smile, but occasionally asked in earnest: Can I leave money to my pet?

Under UK law, you cannot. Animals are legally classed as “chattels”, or personal property. So, since they do not have legal personhood, they cannot hold a bank account, own property, or inherit money.

However, with the right planning, you can guarantee your beloved companions are cared for if you pass away before them.

• Leave your pets to trusted loved ones: You could leave your pet, along with a specific cash gift, to a trusted family member or friend in your will. Using a formal Letter of Wishes, you can request that the money is used solely for the animal’s upkeep.
• Set up a pet trust: For greater control, particularly for long-lived animals such as horses or birds, you can establish a discretionary trust. The trust holds the funds, and the appointed trustees are legally bound to distribute the money to the pet’s caregiver specifically for the animal’s welfare.

Establishing these structures in your will ensures that your pet’s care is fully funded. It may be worth speaking to family members or friends who you intend to name in your will, to ensure they are comfortable with taking on the responsibility of your pet if needed.

2. Navigating potentially exempt transfers (or other important PETs)

Another important “PET” in your estate plan could be a potentially exempt transfer. In fact, this is one of the most powerful tools for reducing your estate’s future IHT liability.

As of the 2026/27 tax year, you can gift an unlimited amount of money or assets to another individual completely free of IHT, as long as you survive for seven years after making the gift.

If you pass away within that seven-year window, the gift could become liable for tax – though not always. However, if you survive for at least three years, taper relief may apply. Here, the rate of tax paid on the gift reduces according to a sliding scale.

Here’s how much tax could be due over the course of that seven-year window:

Integrating lifetime gifts into your estate strategy allows you to support loved ones during key life milestones, such as purchasing a first home, while lowering the overall taxable value of your estate over time.

Remember that gifting over time is a complicated process, and often it’s wise to work with a professional.

3. Retaining control of your wealth with trusts

Trusts are flexible legal frameworks designed to give you control over where your money goes and how it is used after you die.

When you leave money to a beneficiary, it becomes their absolute property. A trust, however, allows you to place these assets under the control of chosen individuals, or trustees, who hold the finances on behalf of your beneficiaries.

You might incorporate trusts into your estate plan for several reasons.

• Protecting your assets against major life changes: Placing assets in a trust protects family wealth if a beneficiary faces personal challenges later in life, such as divorce proceedings or bankruptcy.
• Maintaining family wealth without inflating estates: A trust allows you to pass wealth down to your grandchildren without adding to your adult children’s estates. This avoids IHT compounding across generations.
• Managing provisions for young or vulnerable beneficiaries: You can restrict access to a trust until a beneficiary reaches a suitable age, such as age 21. You can also use trusts to protect individuals who may lack the capacity to manage their funds independently.
• Bypassing probate delays: Assets held in trusts do not typically form part of your estate for probate reasons. This means your beneficiaries will gain quicker access to the funds.

Using trusts ensures your hard-earned assets serve their intended purpose, and appointing suitable trustees means your money is handled responsibly and appropriately on behalf of their intended recipients.

4. Using your spouse’s unused nil-rate band to reduce Inheritance Tax

The UK tax system offers several IHT allowances, but they can be confusing to navigate.

As of the 2026/27 tax year:

• You can pass on up to £325,000 tax-free as the standard nil-rate band.
• If you pass your primary residence to a direct descendant, you can pass on an additional £175,000 as part of the residence nil-rate band.
• This means you could potentially pass on up to £500,000 tax-free.

Crucially, assets transferred between spouses or civil partners are entirely exempt from IHT. So, when the first partner passes away and leaves their entire estate to the survivor, their individual IHT allowances remain unused.

This allowance then transfers to the surviving spouse.

Upon the second partner’s death, their executors can claim both sets of allowances. This means that you could essentially pass on up to £1 million completely tax-free.

It’s worth noting that the residence nil-rate band begins to taper away for estates valued at more than £2 million, reducing by £1 for every £2 the estate exceeds this limit.

Structure your estate for the future

Relying solely on a standard will could mean you’re leaving inheritance opportunities on the table.

Whether your goals involve protecting family wealth through trusts, making efficient use of spousal allowances, or ensuring your pets are cared for after you die, proactive planning is essential.

To discuss your estate planning strategy or review your current provisions, speak to one of our financial planners today.

Aligning your financial plan with a structured will ensures your legacy is protected, tax-efficient, and distributed exactly according to your wishes.

Email us at hale@kelland.co.uk or call 0161 929 8838 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or will writing.

Remember that taper relief only applies to gifts in excess of the nil-rate band. It follows that, if no tax is payable on the transfer because it does not exceed the nil-rate band (after cumulation), there can be no relief.

Taper relief does not reduce the value transferred; it reduces the tax payable as a consequence of that transfer.

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