IHT Planning for Married Couples: Case Study

How David and Sarah used transferable allowances and careful planning to reduce their inheritance tax liability by £200,000.

Case StudyLast updated: February 2026Reading time: 8 min

Note: This is a hypothetical scenario created for educational purposes only. The names, situations, and outcomes are fictional examples designed to illustrate IHT planning concepts. Always consult with FCA-regulated financial advisers and qualified tax professionals for advice specific to your circumstances.

The Situation

David (72) and Sarah (69) are a married couple with a combined estate worth £1.2 million, including:

  • Main residence: £600,000
  • Savings and investments: £400,000
  • Pensions: £150,000
  • Other assets: £50,000

They have two adult children and want to ensure their estate passes to them with minimal tax liability.

Initial Calculation

Initial IHT Calculation

Without planning, if both died today:

  • Combined nil-rate bands: £650,000 (£325,000 × 2)
  • Combined RNRB: £350,000 (£175,000 × 2)
  • Total allowances: £1,000,000
  • Taxable estate: £200,000
  • IHT due: £80,000 (40% of £200,000)

Planning Strategy

David and Sarah implemented several strategies:

  1. Will planning: Ensured their wills leave everything to each other first, then to children
  2. Annual gifting: Started using their £3,000 annual gift exemptions each year
  3. Pension review: Named children as beneficiaries on pension death benefits
  4. Life insurance in trust: Placed existing policies in trust to keep payouts outside the estate
Result

The Result

After 5 years of planning:

  • Gifted £30,000 to children (£3,000 × 2 people × 5 years)
  • Pensions beneficiaries updated (£150,000 outside estate)
  • Life insurance in trust (£50,000 outside estate)
  • Revised estate value: £970,000
  • IHT due: £0 (fully covered by allowances)
  • Tax saved: £80,000

Key Takeaways

  • Married couples can pool their allowances for up to £1 million IHT-free
  • Regular gifting, even small amounts, adds up over time
  • Pension beneficiaries and life insurance trusts keep assets outside the estate
  • Starting early gives more flexibility and options

Plan Your Estate

Use our calculator to see how married couples' allowances apply to your situation.

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