Wealth and values: investing beyond financial return

While trustees of private trusts remain primarily focused on achieving appropriate financial returns for beneficiaries, many are now being asked to consider how trust investments align with family values, responsible stewardship and broader long-term objectives.

Why this matters 

The private wealth landscape is changing. Families often span multiple generations and jurisdictions, while younger beneficiaries are taking a more active interest in how wealth is managed. As a result, trustees, particularly professional trustees who are not themselves beneficiaries, increasingly find themselves balancing financial objectives with wider considerations relating to sustainability, responsible stewardship and family values, while ensuring that their decisions remain consistent with their fiduciary duties and capable of withstanding beneficiary scrutiny. The ongoing transfer of wealth between generations is likely to accelerate this trend as younger family members bring different perspectives to investment and stewardship. 

The blurring of philanthropy and investment 

One of the most significant developments in recent years has been the rise of responsible and impact investing. Families increasingly seek to generate financial returns while also supporting positive social or environmental outcomes through their investment decisions. 

This can allow capital to be deployed in a manner that reflects family values without requiring a separate philanthropic structure. However, it also raises important questions for trustees. To what extent should non-financial considerations influence investment decisions? How should trustees respond where beneficiaries hold different views? How should trade-offs be managed if broader objectives affect investment performance? 

Unlike charitable trustees, whose decisions are assessed against a charity’s purposes, private trustees must principally consider the interests of beneficiaries, the terms of the trust and, where relevant, the settlor’s wishes. 

Managing potential trade-offs 

A common concern is that responsible or impact-focused investing necessarily comes at the expense of financial returns. In practice, the position is often more nuanced. 

Environmental, social and governance (“ESG”) factors are increasingly viewed as part of mainstream investment analysis and risk management. Responsible investment strategies may identify risks and opportunities that traditional financial analysis alone might overlook. However, particular strategies may underperform in some circumstances, especially over shorter investment horizons. 

Trustees should therefore avoid assumptions in either direction. They should consider whether performance outcomes arise from market conditions, implementation issues or the strategy itself, and remain alert to the risk of “greenwashing”. 

The key question is rarely whether a decision ultimately proves successful in hindsight. Rather, it is whether trustees have followed an informed and well-documented decision-making process that can be justified by reference to the trust’s objectives. 

The starting point 

In the charitable context, a sensible place to begin is the investment policy. For private trusts, trustees should review the trust deed together with any letter of wishes, family charter or similar governance document that provides guidance on family values and objectives before formulating an investment policy. These documents may help determine the extent to which non-financial considerations can properly influence investment decisions. 

The investment policy should then translate those objectives into practical guidance by identifying investment goals, any relevant restrictions or exclusions, and the framework for reviewing decisions over time.  Many trusts find that their investment policies have evolved incrementally and no longer reflect current family circumstances. Periodic review can therefore be valuable. 

Understanding responsible investment 

One challenge is terminology. Responsible investment exists on a spectrum and may include: 

    • screening – excluding particular industries or activities;
    • ESG integration – incorporating environmental, social and governance factors into investment analysis;
    • thematic investing – focusing on long-term trends and societal developments;
    • stewardship – using investor influence to encourage positive corporate behaviour and protect value; and
    • impact investing – seeking measurable social or environmental outcomes alongside financial returns. 

Trustees do not need to become experts in every approach. What matters is developing a clear understanding of the trust’s objectives and ensuring advisers understand the outcomes being sought. 

Governance and beneficiary engagement 

Responsible investment often prompts discussion about whose views should be taken into account. While trustees remain responsible for decision-making, engagement with settlors, beneficiaries, family councils and family office representatives can be valuable. 

This is particularly so where different branches of a family hold different views regarding stewardship and wealth. Open communication can help manage expectations and reduce the potential for future disputes. 

Good governance remains essential. Trustees should maintain appropriate records, document their reasoning and ensure that significant decisions are capable of explanation. In some circumstances, separate sub-funds or investment pools may assist where beneficiary groups have materially different investment philosophies. 

Emerging legal developments 

Some jurisdictions are beginning to address responsible investment more explicitly. Bermuda has amended its trust legislation to permit trustees to take account of wider social and environmental wishes, while a number of US states have introduced legislation recognising the ability of trustees to consider beneficiary values alongside traditional prudent investor principles. 

Elsewhere, the position continues to be governed largely by existing trust law principles. Regardless of jurisdiction, trustee judgement, careful governance and clear documentation remain critical. 

Conclusion 

Families increasingly want trustees to consider not only financial performance but also stewardship, sustainability and longer-term impact. For private trusts, however, the starting point remains the pursuit of appropriate financial outcomes for beneficiaries. 

The challenge is therefore not to replace financial return with responsible stewardship, but to determine how wider family values can properly be accommodated within a trustee’s existing fiduciary framework. With appropriate drafting, clear investment policies and robust governance, trustees can ensure that trust assets are managed in a way that is both financially prudent and aligned with the family’s long-term objectives. 

In Trust – July 2026

With the Prime Ministerial leadership contest drawing to a close and a new Prime Minister preparing to take up residence in Number 10, attention inevitably turns to what comes next. New leaders are often keen to make their mark, bringing fresh priorities and policy proposals. While we may need to wait until the Autumn Budget to see the full direction of travel, periods of political transition are a useful reminder of the importance of keeping personal, financial and succession plans under review.

This edition of In Trust explores three areas where change is already on the horizon: cohabitation reform, inheritance tax on pensions and the proposed high-value residential property surcharge, often referred to as a “mansion tax”. Whether these measures survive intact under the new administration remains to be seen. With a new Prime Minister and Cabinet taking shape, further reform is likely to follow.

Alongside these policy developments, we also explore broader issues affecting individuals, families and trustees, from purpose-driven investing and the continuing legacy of the Windrush generation to the growing challenge of protecting identity in an age of deepfakes and AI.

We hope you enjoy this edition of In Trust and, if any topic raises a question, please contact your usual Wedlake Bell adviser.

In this issue…

In the press…

  • STEP have renewed Wedlake Bell’s Platinum Employer Partner accreditation under the STEP Employer Partnership Programme. We were commended on our strong learning culture, commitment to professional development at all levels, and the tailored training and development opportunities available to our people. Read more here.

  • Victoria Mahon has been quoted in eprivateclient discussing the growing importance of professional philanthropy advice and how advisers and philanthropic platforms are helping donors make informed giving decisions, while increasing transparency and accountability for charitable organisations. Read more here.

  • Camilla Wallace recently joined Mary Rose Gunn, founder and CEO of The Fore, on the latest episode of the Brace For Impact podcast to discuss philanthropy, tax and the future of charitable giving. Read more here.

  • New Law Journal featured Ann Stanyer’s article on the growing number of Court of Protection disputes concerning family visits in care settings. Read more here.

A fairer end to relationships: proposed reforms to divorce law and the law for cohabitants

Reforming financial remedies on divorce

The current law on financial remedies is now over fifty years old and drafted when societal understanding and expectations of marriage were very different. The legislation has been supplemented by case law which have established guiding principles of interpretation. While this has allowed flexibility, it has also resulted in a system characterised by broad judicial discretion and limited predictability.

The Consultation proposes a “codification‑plus” model, which would bring established principles into statute while introducing targeted reforms where needed. The objective is not to replace discretion entirely, but to make outcomes more accessible and foreseeable for divorcing couples.

Fairness through needs and sharing

The Consultation proposes that fairness should be achieved explicitly through the dual principles of:

  • sharing – as a starting point for dividing matrimonial property; and
  • needs – where equal division is insufficient.

Under this model, the presumption would be that matrimonial assets should be shared equally, unless required to meet needs. This reflects established case law but is not yet articulated in legislation.

Notably, the government is not proposing to elevate “compensation”, the third (but rarely seen in practice) element of financial division, citing its uncertain status and risk of increased litigation.

Clarifying property: defining the boundaries

The Consultation also proposes statutory definitions of matrimonial and non‑matrimonial property.

This is a significant development. At present, the classification of assets — particularly inherited or pre‑acquired wealth — can be contentious and unpredictable. Codification would provide clearer guidance, while still allowing non‑matrimonial assets to become subject to sharing over time (“matrimonialisation”).

A three‑stage approach to needs

The Consultation seeks to bring structure to financial “needs” and proposes a three‑stage hierarchy:

  1. children’s welfare first;
  2. core financial needs (housing, income and pensions); and
  3. discretionary needs (where resources permit).

This approach reflects existing practice but introduces a clearer analytical framework. In particular, it distinguishes between essential needs and lifestyle‑based claims.

Qualifying nuptial agreements

Another key proposal is the introduction of binding qualifying nuptial agreements. These would allow couples to determine financial outcomes in advance, subject to safeguards such as full disclosure and independent legal advice.

Crucially, such agreements would not permit parties to contract out of meeting “needs”, but they would significantly increase autonomy and reduce the scope for contested proceedings.

Domestic abuse and financial outcomes

The Consultation also addresses whether domestic abuse — particularly economic abuse — should play a greater role in financial determinations. Current law sets a high threshold for “conduct”, meaning such factors rarely influence outcomes.

Reforming the law for cohabitants on separation

In contrast to divorce, the law governing cohabitants on separation remains fragmented and inadequate.

Given the 156% rise in cohabitating couples since 1996, it is now a major feature of modern family life, with 51% of children now born to cohabiting couples. The Consultation proposes a new statutory framework to provide targeted protections.

Scope and eligibility

The proposed regime would apply to individuals in “enduring family relationships”, subject to defined criteria:

  • a minimum of three years’ cohabitation; or
  • a shorter period where the couple has a child together.

The framework would apply automatically but include the option to opt out.

Needs‑based model

Unlike the divorce regime, the separation framework for cohabitants is deliberately narrower. The starting point would be preservation of legal ownership, with departure only occurring where necessary to meet defined needs.

Notably, there is no proposal of equal sharing for cohabiting couples. This reflects the absence of a formal legal commitment and preserves the distinction between marriage and cohabitation.

The model adopts a needs‑based approach, but only essential needs (housing, capital, income and pensions) are considered and discretionary needs excluded. There is a strong emphasis on achieving a clean break and it is proposed that maintenance be available only in exceptional circumstances and for limited periods.

Remedies and structure

It is proposed that a range of remedies would be available — including property adjustment and lump sum orders — but applied within a narrower, needs‑focused framework which mirrors, in simplified form, the approach to divorce while maintaining a clear distinction in outcomes.

Safeguards and opt‑out

A key feature is the opt‑out mechanism, allowing couples to exclude themselves from the framework by agreement, and proposed safeguards would include full financial disclosure, independent legal advice and formal contractual requirements.

Reforming the law for cohabitants on death

The Consultation sets out proposed reforms to give qualifying cohabitants greater rights where a partner dies without a valid Will (“intestate”). At present, cohabitants have no automatic right to inherit and must generally rely on a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act).

The central proposal is that cohabitants who meet a certain criterion should inherit under the intestacy rules in the same way as spouses/civil partners. The Consultation also proposes that cohabitants have the same priority to apply for probate (a Grant of Letters of Administration), ensuring that those who inherit can also administer the estate.

In terms of the criterion, the government is minded to adopt a “marriage-equivalence” definition of cohabitation, similar to that used under the 1975 Act. It is seeking views on minimum qualifying periods, including whether cohabitants without children should generally have lived together for at least five years and whether a shorter period should apply where the couple have a child together.

The Consultation recognises that the 1975 Act may have to be amended to bring it in line with any new law relating to cohabitants.

Conclusion: a more coherent framework

The Consultation represents a concerted effort to bring coherence to family law at the end of relationships and on death, so that the law better accommodates modern family life.

For families, the proposed reforms offer the prospect of a system that is not only fairer, but more understandable, reducing conflict at a time when clarity is most needed.

The government consultation is open for responses until 14 August. Wedlake Bell will be submitting a response and will be closely following developments in this area and how these impact our clients.

New High Value Council Tax Surcharge: consultation reveals how the regime could work

The Government has now launched its consultation on the design and delivery of the HVCTS, running from 19 May 2026 to 14 July 2026. The consultation is inviting views from local government, homeowners, tax experts, legal professionals and the wider property industry and the information contained in the consultation paper gives us some much-anticipated insight into how the Government is envisaging the HVCTS will be applied.

The consultation is important because many of the practical details remain to be settled. It seeks views on matters including how “owner” should be defined, what discounts and exemptions should apply, how those unable to pay may be supported through a deferral mechanism, how valuation, billing, appeals and enforcement should work, and the potential equalities impacts of the proposals.

How much will you pay?

The surcharge applies to properties valued at £2 million or more with four bands as follows.

Property value

Annual surcharge

£2.0m – £2.5m

£2,500

£2.5m – £3.5m

£3,500

£3.5m – £5.0m

£5,000

£5m +

£7,500

The HVCTS will rise annually in line with the Consumer Prices Index (CPI) and properties will be revalued every five years by the Valuation Office. The first revaluation will take place in 2033. It is proposed that properties that are significantly improved or altered after implementation of the HVCTS will be revalued and banded at the next valuation or, on the sale of the Property, whichever is sooner.

The administrative burden

When the HVCTS was announced, the sheer administrative burden of introducing and implementing a new tax including revaluing and re-banding properties seemed immense. The consultation paper makes it clear that where appropriate, existing council tax processes will be replicated in the HVCTS system. For example:

  • The definition of “Dwelling” that is proposed to be used is taken from the Local Government Finance Act 1992 as already used for council tax. Dwellings will include their gardens, garages and private storage buildings mainly used for domestic purposes.
  • The process for challenging valuations and banding will follow the same process and timescales as already used for council tax.
  • The criteria for assessing eligibility for a deferral of payment of the HVCTS on the basis of disability or severe mental impairment could be based on the same criteria as for equivalent council tax discounts and exemptions.
  • Payment schedules are likely to follow the same billing cycle as for council tax with the option of 10 or 12 month instalment payments.

In addition, the consultation paper explains that local authorities will be compensated for the additional administration costs that they will face in implementing and enforcing the HVCTS in their area.

The Valuation Office also faces a significant challenge in revaluing and banding properties ahead of the introduction of the HVCTS. The consultation paper sets out the valuation approach that will be adopted for properties falling within the scheme (those valued at £2 million or more in 2026).

The Government is proposing to use the Valuation Office’s existing independent and accredited automated valuation model (AVM), already used for domestic valuation work together with professional valuers reviewing and assuring those properties identified by the AVM as being within the scope and the initial valuation provided by the AVM.

Who will pay?

As stated above, the consultation paper sets out to define owners. The Government proposes that an owner will be the legal owner(s) of a residential property. Owners can be individuals, corporate entitles, long leaseholders, those with a lease for life or until marriage and trustees including those holding on bare trusts.

Exemptions are proposed for certain classes of residential property including halls of residence, ministry of defence accommodation such as barracks, diplomatic accommodation, care homes, long stay hospitals and hospice facilities and domestic violence refuges.  

The consultation seeks comments as to whether the owners of “tied” properties could be exempt for example where a farmer has to live on his farm for the purposes of his business.

Developers of luxury new build properties will be exempt in relation to unsold properties but only for a period of 12 months after a completion notice is issued. With this in mind they will need to be confident that properties will be sold either off plan or in quick order once completed. With increasing numbers of developers holding unsold units and “off-plan” deals at a 12 year low across England & Wales, a risk of paying HVCTS will add to developers’ already significant costs of holding and financing unsold units.

Affordability and deferral options

The Government states that it recognises that there may be affordability issues for many home owners including those on lower incomes such as retirees or those affected by illness or job loss. When the HVCTS was announced the Government made it clear that deferral options would be included with the option to pay the tax on the sale of the property. But the detail now proposed does not make such deferral open to all. There will be no discounts or reductions and no deferral for second homes or corporate owners.

Eligibility for deferment will be assessed on the income or capital threshold of the owner, or on a defined disability or mental impairment criteria (which might make it difficult for an owner to move from their property).

The proposed income threshold is that deferral may be available for those with an income of up to £35,000; or with capital savings of £16,000 or less. Applications for deferral will need to include evidence of income and investments.

Deferral will be available at the point when HVCTS is introduced or a property is purchased, or at a later date if circumstances change. Equally, an owner can opt out of deferment at a later date before the sale of a property and pay the tax due at that point.

Deferral has a number of issues that will need to be considered. Local authorities will have the power to take a charge over any property where the HVCTS is deferred but there must be sufficient equity in the property to secure the deferred amount. The deferred amount will increase with each passing year and interest will accrue on top of the deferred amounts. There is no indication at this time as to what the appropriate interest rate will be set at and the consultation invites comments on what an appropriate level of interest might be.

Information gathering

It is anticipated that the first bills for HVCTS will be issued in March 2028. Ahead of that process a draft list of properties falling within the scope of HVCTS will be issued in late 2027 allowing time for owners to correct inaccuracies without the need to issue a subsequent formal challenge.

At the outset and as a continuing process once the HVCTS is up and running, local authorities will need to gather information as to who the correct owner of each affected property is. For this purpose information notices will be issued to the person that they consider to be the liable owner but can also be sent to occupiers, management companies and lettings agents etc. Whilst there are no proposed penalties for non-owners who do not respond to an information request, owners who fail to respond or provide mis-information are likely to face financial penalties of 10% of the total annual HVCTS liability after 21 days of an information request notice being issued increasing to 30% after a further 21 days (at the local authorities’ discretion and subject to a right of appeal to the valuation tribunal).

Penalties will also apply where a liable owner fails to correct an incorrect assumption regarding exemptions or premiums within 21 days of realising that the information is incorrect.

The information gathered as part of the HVCTS process may also be used to inform whether non-UK resident owners should be required to pay an additional HVCTS premium on properties falling within the scheme. Views are sought as to whether such owners should pay an additional premium as they already do in relation to stamp duty land tax.

Enforcement

Local authorities already have strong enforcement powers and it is proposed that the enforcement powers granted in the HVCTS system will replicate the same enforcement framework as already exists for council tax. The national council tax collection rate is currently 96%.

Planning ahead

The HVCTS will not come into force until 6 April 2028, but the consultation now under way means that the shape of the regime is still being settled. Owners, prospective purchasers and advisers should follow the consultation closely and consider responding before the 14 July 2026 deadline, particularly where ownership structures, valuation evidence, hardship deferral or exemptions may be relevant.

While the HVCTS is modest compared to property taxes in some European countries, it signals a shift in the UK’s approach to high-value homes.

Depending on the purchaser and the property, other taxes to those mentioned in this article can be relevant.

Overseas investors should review their existing holdings, factor the tax position into purchasing budgets and seek professional advice on valuations, ownership structures and any consultation response that may be appropriate.

For further information please contact Emma Sear or your usual Wedlake Bell adviser.

Planning for major change: relevant unused pension funds and pension death benefits will become subject to inheritance tax from 6 April 2027

From 6 April 2027, many unused pension funds and pension death benefits under registered pension schemes will be brought into a deceased person’s estate for inheritance tax (“IHT”) purposes. This marks a significant shift – for years, pensions have been a powerful estate planning tool because unused funds could often pass free of IHT.

On 11 May 2026, HM Revenue & Customs (“HMRC”) published a technical note explaining how the new regime under Finance Act 2026 is expected to work in practice, including a five-stage process for information sharing between personal representatives of an estate (“PRs”) and pension scheme administrators (“PSAs”). On 18 May 2026 HMRC published draft regulations and guidance notes. The detail is helpful, but the message is clear: from April 2027, estates with relevant pension wealth will be harder to administer, more time-sensitive and demand greater collaboration between all parties. The impact will be felt not only by beneficiaries, whose inheritance may be delayed and/or reduced by a larger than expected IHT bill, but also by PRs and PSAs, who face a fundamental overhaul of their existing processes in order to manage a new intricate compliance framework.

New rules

Under the new rules, PRs will be primarily responsible for reporting and paying the IHT attributable to pension assets, even though the pension assets are outside their control. In practice, that means PRs will need to identify the deceased’s pension arrangements quickly, contact each PSA, obtain valuations and beneficiary details for benefits within IHT, and factor those figures into the wider IHT calculation for the estate. All of that must be done against the usual short IHT payment deadline: six months from the end of the month of death, after which late payment interest starts to accrue (currently at 7.75%).

HMRC has said PRs must take “reasonable steps” to identify pension arrangements. A government backed “Pensions Dashboard” is in development to help individuals trace forgotten pension pots; however, this is unlikely to be available to PRs for many years if at all, leaving PRs grappling with often incomplete records and multiple historic workplace schemes – identification will be one of the most challenging parts of the new regime. 

Process overview

Once a PSA has received notification of death, a structured information-sharing process begins. PSAs will need to provide details of the relevant pension arrangements and values within 28 days of the PRs request, after which the PRs decide whether IHT is payable and attributable to the pension benefits. If so, the PRs or prospective PRs may issue a withholding notice requiring the PSA to retain up to 50% of the relevant pension benefits for up to 15 months. Timing will be crucial – if notice is given too late, the PSAs may already have made distributions leaving PRs short of funds. If payments are made while a valid withholding notice is in force, the PSA can become jointly and severally liable for the IHT attributable to those pension assets. The technical note also comments on the pensions IHT direct payment scheme, under which either PRs or pension beneficiaries can direct PSAs to pay the relevant IHT directly to HMRC. PRs will also need to report any adjustments to the IHT position and ultimately seek IHT clearance before they can be fully released from liability, including any additional IHT due on pensions discovered later unless PRS have been careless. It will be vital for PRs to carefully navigate these provisions to avoid unintentional delays and/or compliance issues, all while balancing the needs of both the beneficiaries of the estate and the pension beneficiaries, who may be different. 

Practical tips

These reforms affect not just tax planning and Will drafting, but the administration of estates and the operation of pension schemes. Although further regulations and guidance are expected before April 2027, there are sensible steps that can be taken now.

For private clients, the priority is to identify and review existing pension arrangements, keep records and nomination forms up to date and reconsider how pensions fit into wider succession planning given the new IHT exposure. Bringing pension funds into the IHT estate may affect eligibility for reliefs such as the residence nil rate band, which starts to taper once an estate exceeds £2 million. Professional bodies are continuing to discuss with HMRC how these reforms will affect the calculation of the reduced 36% IHT rate where at least 10% of a person’s net estate is left to a UK charity. Existing Wills and lifetime planning strategies should therefore be revisited.

For PRs, estate administration will become more demanding, with greater pressure to gather information quickly, coordinate with PSAs and manage the IHT position all within strict time limits.  Early enquiries, prompt contact with PSAs and clear communication with beneficiaries may reduce the risk of delay, shortfalls and disagreement.

For PSAs, existing processes may need significant revision to deal with tighter deadlines and more complex information-sharing requirements. The new regime will require systems for verifying PRs or prospective PRs, identifying benefits in scope, due exercise of discretions, providing timely valuations and beneficiary information, and dealing with withholding notices and direct payments to HMRC. Liquidity may be an issue for PSAs where schemes hold illiquid assets. This may be further compounded by the unavailability of IHT business and agricultural property reliefs for pension assets; loss on sale reliefs on the IHT payable should a pension decrease in value following death will not be applicable either.

All parties need to be aware of overlapping tax and administrative issues. There may be income tax as well as IHT pension consequences, valuation can be difficult for some pension assets, and delays in duly exercising discretionary death benefit powers may create additional complications. For many clients, the key question will be how the resulting IHT and administration burden should be managed – advance review and joined-up private client and pensions advice will be essential.

If you would like guidance on how the new rules may affect your estate planning, pension arrangements or the administration of an estate, please contact a member of our private client or pensions team.

Related articles

Cohabitation reform: a long-overdue shift in the law or an attack on family wealth?

The Law Commission published its report recommending reform as long ago as 2007 so, after nearly 20 years, campaigners are heartened by the Government’s attention. But is it sensible reform or a charter to trap the unwary?

The case for reform

For generations, the legal choice for English families has been clear. Either marry and accept the court’s powers to redistribute capital and income in the event of divorce or avoid marriage altogether and retain family wealth intact, subject to meeting the financial needs of children.

The problem with it all is that survey after survey revealed the majority of respondents actually believed in a quite fictional doctrine of common law marriage and were shocked to learn that, at the end of cohabiting relationships, they might be entitled to no share of the assets or income that they had worked hard to build.

At the heart of this reform agenda is the clear policy concern as to the economic consequences of how society’s families are changing. One in four adults who have a partner are not married and nearly half of children do not live with both their biological parents throughout childhood. Our society sees marriage as optional whilst believing, quite erroneously, that the law will always provide.  

Cohabiting couples currently have no equivalent to the Matrimonial Causes Act framework that allows courts to redistribute financial resources between divorcing couples to achieve fairness. Instead, disputes between unmarried couples whose relationships come to an end are governed by a complex series of property and trust laws, focusing on establishing legal ownership rather than fairness.

The Children Act allows limited financial claims to be made for the benefit of children. But it pointedly excludes providing for the needs of the parent that cares for the children, the overwhelming majority of whom are women.

Generally, women are disproportionately affected by current cohabitation law as they are more likely to reduce working hours or take lower-paid roles to undertake childcare, leaving them economically vulnerable at separation. Many women find themselves at the end of a lengthy relationship, having looked after their own children and, in some cases, their partner’s children from previous relationships, only to realise that the myth of the common law marriage is just that – a myth that leaves them without any capital or income to rely on in later years.

Other nations have responded sooner.  New Zealand, Australia and parts of Canada, for example, recognise cohabitants in both separation and succession law and have done so for years. These systems provide statutory rights based on relationship duration and interdependence.

The proposed model

The Government proposes a bespoke statutory framework for cohabitants in England and Wales similar to, but deliberately narrower than, divorce law.

The scheme would apply to couples in committed, interdependent relationships who have either lived together for at least three years or share a child.

The starting point is that each party retains what they legally own. The court would only depart from that position where necessary to meet defined needs. Of course, we know from divorce law that needs is an elastic concept and a highly subjective one at that. So, this will likely be fertile ground for litigation.

Children’s needs would take priority, and there is a strong emphasis on achieving a clean break.

Importantly, discretionary or lifestyle needs are excluded, creating a clear distinction from divorce law and maintaining an incentive in favour of marriage.  Indeed, cohabitants would specifically not be entitled to a more favourable outcome than spouses.

Opt-out provisions

A defining feature of the proposed scheme is that it includes an opt-out facility similar to nuptial agreements within divorce. 

For those wishing to protect family wealth, this provision will be critical.  Any such agreement will need to be signed before the minimum cohabitation duration is reached (currently proposed to be three years) or before the first child is born. 

This may seem a particularly unromantic provision, but we have grown used to a similar rule in relation to pre-nuptial agreements, which have become a popular game-changing development in divorce law. The key for those wishing to protect wealth in a cohabiting relationship, particularly if the plan is to have children will be to take advice early and start the conversation sooner rather than later.

Conclusion

The direction of travel is clear. The debate now turns on how far reform should go, and how robustly the law should respond to economic disadvantage arising from relationships.

Should you have any queries, please contact Alex Davies, partner and head of the family team. Alex regularly advises on both cohabitation agreements and nuptial agreements. For a no obligation consultation, he can be contacted on adavies@wedlakebell.com or 07827 961826.

In Trust – May 2026

The reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) are now in force, fundamentally changing the inheritance tax (IHT) treatment of certain business and agricultural assets. With 100% relief now effectively capped at £2.5 million, tax planning for such assets that once worked well may no longer produce the intended result. For many, this makes now an important time to review existing estate planning, particularly Wills that were drafted on the assumption that APR or BPR would be available at 100% relief. Business and agricultural assets may now give rise to an unexpected IHT charge, with practical consequences for families, businesses and trustees alike. Planning options are available and, if you are affected, we would recommend reviewing your Will and estate planning in light of these changes.

In this edition, we highlight a key development affecting charitable giving through Wills, explore succession planning using a Family Investment Company, consider the evolution of the Renters’ Rights Act, and examine the realities and legal implications of modern living arrangements.

We hope you enjoy this edition of In Trust and, if a topic raises a question, please do get in touch with your usual Wedlake Bell adviser.

In this issue…

  • Changes to Inheritance Tax (IHT) relief on charitable gifts — for deaths occurring on or after 6 April 2026, gifts left in a Will on trust for general charitable purposes at the discretion of the trustees, rather than directly to qualifying charities, no longer automatically qualify for relief from IHT.
  • Family Investment Companies: a practical tool for long-term wealth planning — for families looking to plan for the next generation without giving up control, Family Investment Companies (FICs) are becoming an increasingly popular solution as a flexible alternative to trusts. We consider how FICs can be structured, funded and governed, and the advantages — and limitations — of using them as part of a long‑term wealth strategy.
  • Planning ahead: advance decisions and Lasting Powers of Attorney — many overlook what could happen if they lose capacity during their lifetime. Advance decisions may help ensure your wishes are respected and your affairs managed if the unexpected happens.
  • Protecting family wealth across relationships — as more couples choose different arrangements for living and owning property, understanding the legal framework is key. Pre-nuptial agreements, cohabitation agreements and declarations of trust can build certainty, help manage expectations and preserve family wealth over the long term, but all have different pros and cons.
  • The Right of First Refusal: what trustees must do before disposing of a freehold — disposals of residential or mixed-use freeholds can trigger complex Right of First Refusal obligations. Trustees who overlook these requirements risk invalid transactions, criminal exposure and costly delays.

In the press…

Family Investment Companies: a practical tool for long-term wealth planning

What is a FIC?

Broadly, a FIC is a bespoke private company which is usually set up to hold and invest assets as part of a long-term estate and succession plan. Due to the Inheritance Tax (IHT) restrictions on the amount of assets that can be transferred into trust during a person’s lifetime and the associated ongoing tax charges that apply to most trusts, many families are turning to alternative structures such as FICs to facilitate the transfer of their wealth to the next generation.

FICs pay corporation tax rates (currently 25%) on investment returns and can benefit from certain tax deductions, which makes them generally a more tax efficient vehicle for long-term investment growth than individual or trust holdings. However, consideration needs to be given to the extraction of profits from the company as individual shareholders will still pay tax on dividends and/or capital distributions received.

Funding a FIC

The typical structure of a FIC places parents at the centre of control. Parents capitalise the company, most commonly with cash and by way of an interest‑free loan and/or by subscribing for particular classes of shares. The FIC will then invest those funds, often in an equity heavy portfolio. Whilst other assets could instead be transferred to the FIC, this will require careful thought and could trigger a capital gains tax (CGT) or have other tax implications unless relief is available.

While the immediate IHT benefits in parents seeding a FIC by way of a loan are limited, as the right to repayment of the loan balance is an asset of their estates for IHT purposes, the structure remains flexible and provides IHT mitigation opportunities for the future. For example, once the loan proceeds are invested, the shares in the FIC are usually structured so that future capital growth will be outside of the parents’ estates. Parents can draw down on the loan, free of income tax and CGT and use the funds as they wish. Alternatively, they could gift their right to repayment to the next generation at a later date. Such a gift would constitute a potentially exempt transfer for IHT purposes but, provided the parents survive the gift by seven years, the value of the loan would no longer be within their estates and subject to IHT on death. With careful structuring, a FIC can therefore be established in a tax effective way, while still allowing parents to access to capital.

Retaining control

The ability for parents to retain decision‑making control is achieved through the company’s board structure and tailored share rights. Parents typically act as directors and chairpersons of the board, with the company’s constitutional documents entrenching their position. Although day‑to‑day investment decisions are often delegated to a professional investment manager, the board ultimately determines if, when, and to whom profits are distributed. The family’s specific objectives can be reflected in the FIC’s articles of association and, where appropriate, a private shareholders’ agreement.

Distributing growth

The share capital of a FIC is highly flexible and can be divided into multiple classes with different rights. Commonly, parents hold voting shares carrying little or no economic entitlement, thereby preserving control but ensuring any value of the FIC that is within their estates for IHT purposes is kept to a minimum. Children may hold shares with rights to dividends and capital growth but no voting rights, ensuring that future value accrues to the next generation while control remains with the parents. Additional share classes may be issued to the trustees of a family trust, providing asset‑protection benefits and allowing minors or vulnerable beneficiaries to benefit without owning shares outright.

For a more detailed discussion of the commercial advantages and disadvantages of FICs, please see our earlier article: Why should entrepreneurs consider a family investment company (FIC)? – Wedlake Bell

Considerations

FICs offer advantages such as long‑term investment consolidation without the ongoing IHT charges to which most types of trust are subject, but they still have their own tax considerations and involve initial and ongoing administration costs, together with company compliance obligations.

As with any family wealth structure, FICs are not a one‑size‑fits‑all solution. Specialist tax and legal advice is essential to ensure that the structure is appropriate, robust and aligned with the family’s long‑term objectives.

How we can help

Our private client and corporate teams work closely together to assist clients wishing to establish a FIC. Together we can help:

  • assess whether a FIC is the right solution, taking into account the family’s commercial mindset, governance priorities and succession plans;
  • advise on the most effective way to establish the company, including capitalisation, share class design and funding arrangements;
  • design bespoke constitutional documents, including articles of association and shareholders’ agreements, to embed decision‑making control, manage distributions and reflect the family’s values and objectives;
  • advise on board composition, voting rights and delegated investment authority, helping families balance oversight with professional investment management; and
  • provide ongoing support to ensure the FIC operates smoothly and remains fit for purpose as circumstances evolve.

Should you wish to find out more information about FICs, please contact a member of the private client team.

The Right of First Refusal: what trustees must do before disposing of a freehold

Failure to comply with RFR can invalidate the transaction, expose trustees to criminal prosecution, and create personal liability risks that cannot be avoided by good intentions or delegation. Breaches cannot be remedied retrospectively.

What is the Right of First Refusal?

RFR is a statutory protection requiring landlords to offer their interest to qualifying leaseholders before selling to a third party. The purpose is to give leaseholders the opportunity to acquire the freehold or headlease of their building and take control of its management. When challenged, courts have consistently sided with leaseholders.

The legislation applies regardless of ownership structure. Trustees are treated no differently to individual or corporate landlords.

When does RFR apply?

RFR applies where (i) the building contains two or more flats; (ii) more than 50% of those flats are held by ‘qualifying tenants’ (broadly, long leaseholders); and (iii) at least 50% of the internal floor area (excluding common parts) is residential. Assured tenancies (which will become the default letting tenancy following the Renters’ Rights Act 2025) do not qualify for RFR.

Compliance risk is often higher in buildings which trustees may not regard as primarily residential. Mixed-use buildings held as long-term commercial investments within trusts are a common source of inadvertent non-compliance.

RFR is triggered by transactions trustees may not intuitively regard as sales, including grants of headleases, assignments of the landlord’s interest, or disposals of common parts of the building such as roof space, lofts or corridors.

Are there exemptions?

Although exemptions exist, they are narrow and fact-specific. Assumptions that an exemption applies (for example, because a transaction is intra-group, part of estate planning, or commercially unavoidable) are a common cause of error. Disposals required by statute, wills or matrimonial proceedings will often be exempt, but trustees should remain cautious.

Helpfully, transfers of legal title arising solely from the appointment or replacement of trustees of the same trust are expressly exempt.

What must trustees do before selling?

Where RFR applies, trustees must serve a formal Section 5 Notice on all qualifying leaseholders setting out the principal terms of the proposed disposal. Leaseholders must be given at least two months to accept (four months for an auction). Only if the offer is not accepted may trustees proceed with a third‑party sale (even conditionally), and then only on no more favourable terms.

Strict rules govern notice content, service and timing. Failure to address RFR early can derail a timetable or transaction entirely.

Consequences and key takeaway

Failure to comply is serious. Non-compliance is a criminal offence, for which trustees may be prosecuted. Leaseholders may also compel the purchaser to transfer the interest to them on the original terms.

Given trustees’ fiduciary duties, early advice and strict compliance are essential to avoid delay, loss of value, aborted sales and potential personal liability.

RFR is technical, time‑sensitive and easy to underestimate. Trustees should assume it may apply to any disposal of a freehold or headlease including flats, and take early specialist advice.

For further information please contact James True, Parminder Sidhu or your usual Wedlake Bell adviser.

Planning ahead: advance decisions and Lasting Powers of Attorney

Recent coverage of the Terminally Ill Adults (End of Life) Bill has reignited conversations about planning for the possibility of future incapacity, and the relationship between advance decisions and Health and Welfare Lasting Powers of Attorney (LPAs) is a frequent query.

Advance decisions

These are commonly made by people with serious or progressive illnesses, and/or those who have strong personal, religious or ethical views about particular forms of treatment. Provided that they are properly made and applicable to the circumstances, advance decisions must be followed by healthcare professionals, even if they believe that refusing the treatment is not in the person’s best interests. This can provide reassurance that specific wishes will be honoured and may help to alleviate uncertainty or distress for loved ones. While an advance decision can be used to refuse particular treatments, it cannot be used to demand treatment, nor can it authorise the refusal of basic care, such as food or drink, or request anything unlawful, including assisted dying.

Health and Welfare LPA

In contrast, a health and welfare LPA enables appointed attorneys to make a wide range of decisions regarding health and care once capacity has been lost, which may include decisions about life sustaining treatment, without needing to anticipate the specifics of such treatment. Whereas advance decisions can be made orally or in writing, and may be considered as evidence of wishes even if they do not meet all formalities, the requirements for creating an LPA are far stricter (including a need for the LPA to be registered with the Office of Public Guardian so that its existence becomes publicly searchable), and attorneys must only make decisions in that person’s best interests.

Consistency is key

It is possible to have both a health and welfare LPA and an advance decision in place – using an LPA for broad decision-making and an advance decision to reflect specific wishes – however it is crucial that they are drafted consistently. Attorneys acting under a health and welfare LPA cannot consent to treatment if a later valid advance decision refuses that treatment. If an LPA is made after an advance decision and authorises attorneys to make decisions about the same treatment specified in an advance decision, the LPA will override and invalidate the advance decision. If an LPA does not give attorneys power over life-sustaining treatment, or does not cover the same treatment, the advance decision continues to apply. A health and welfare LPA made alongside or after an advance decision can specify which document takes precedence for certain decisions.

Practical steps to consider

It is essential to be well-informed before making an advance decision or an LPA. Consulting a healthcare professional about particular treatments is advisable, especially when considering an advance decision. It is also beneficial to involve friends and family and to keep them informed of any specific arrangements.

If you require further information about advance decisions or LPAs, please contact one of our specialists or your usual Wedlake Bell adviser.