Demystifying estate planning

The award winning wealth management and investment experts Killik & Co have opened a new space on Devonshire Road – House of Killik Chiswick. The Chiswick Calendar is pleased to share their guest blogs on how best to plan and save to acquire the wealth to achieve your goals.

Killik & Co won “Best Discretionary / Advisory Wealth Manager’ in the 2023 FT Investors Chronicle Awards.”

The essentials of estate planning

In this article, Phil Sole, Relationship Manager at House of Killik Chiswick shares his thoughts on the essentials of estate planning, focusing on some ways to mitigate the impact of Inheritance Tax.

What are the cornerstones of estate planning?

The first key step is to set up a valid will. This crucial document ensures that someone’s assets end up in the right hands after their death. The consequence of not having a will in place is that the fixed rules of intestacy apply. These impose a strict statutory running order in terms of who will benefit from an estate.

It is important that people are clear about exactly what a will does and doesn’t cover. For example, a will won’t cover most pensions, life assurance policies, or death in service payments from an employer. Assets held outside the UK are not automatically included, and it may be necessary to create a separate will for the relevant jurisdiction.

Next, it is worth revisiting assets that are jointly owned, such as a main home or bank accounts. They automatically pass to the surviving party when one of them dies, but this might not be how one party would want their share to be distributed.

How should someone choose an executor?

Most people nominate a spouse or partner, on the basis that they are known and trusted. The problem sometimes is that a surviving spouse may themselves be elderly or vulnerable.

Since more than one person can act in this capacity, it is also possible to appoint a combination of, perhaps, a spouse along with any responsible children, plus an external professional. The latter can bring an understanding of the legal and tax issues associated with a death estate and be able to speak or act objectively when it comes to managing any disputes.

Why do powers of attorney matter so much?

There are two types of lasting power of attorney (LPA), one covering property and financial affairs, and the other health and welfare. Once registered, they can be used should someone lose the capacity to look after their own affairs, or earlier if preferred. Many are never invoked but nonetheless provide valuable peace of mind.

How does inheritance tax work?

Inheritance Tax (IHT) is levied on what is called a “death estate,”- all property, belongings, investments, and money of the deceased, less any permitted liabilities, IHT-exempt assets and nil rate bands – and is charged at 40%.

What are the other broad ways to reduce an IHT bill?

The simplest option is to encourage someone to spend more. The trouble is the same people who have worked hard to accumulate wealth are sometimes the least likely to prioritise enjoying it.

The next thing to consider is ‘lifetime gifts’. For example, there is a £6,000 annual exemption available to a couple and, additionally, surplus income can be given away subject to the relevant tests.

These include making sure that any gift forms part of someone’s normal expenditure, does not reduce their standard of living, and is made out of income rather than as a reduction in their assets.

Beyond these opportunities, plus a few others that relate to specific circumstances such as marriage, there is the potentially exempt transfer (PET) rule. This allows gifts of any size to be made to any person, but they must happen at least seven years before someone dies to be fully effective.

Life assurance can be useful to clients who may be facing a large IHT bill without having sufficient liquid assets (for example, cash) to meet it. This situation is common where a family’s wealth is tied up in property. A protection policy won’t reduce the IHT bill, but it should make it easier to settle, provided the premiums are paid in accordance with the contract.

Are there any other options?

Firstly entrepreneurs, and anyone who has invested in unlisted companies in the past, will probably be familiar with the term ‘business relief.’ It applies at a rate of up to 100% on qualifying investments.

What this means is that, provided someone has owned the relevant assets for at least two years prior to death, they should attract a reduction of up to 100% in IHT as part of an estate.

Given that there are no free lunches, the types of investments that qualify are typically higher-risk smaller companies. So, proper consideration needs to be given to whether they are suitable and, assuming that they are, how much of someone’s overall investable wealth should be allocated to them.

The second specialist area is trusts. Here, the idea is that rather than making a direct gift, it is held by a separate vehicle on behalf of an ultimate beneficiary. That sounds simple enough, but trusts must be created with care if they are to achieve their original objectives and stay the right side of the tax rules.

Whether someone is setting up a simple, or a more complicated trust it is vital to get the legal structure right and deal with the related tax and administration issues correctly. Using a suitably qualified tax adviser and solicitor, in collaboration with a financial planner, can be the best bet.

To learn more about how we can help with estate and succession planning, please drop into House of Killik Chiswick for a complimentary chat or email chiswick@killik.com.

Please be aware that as with all investments, your capital is at risk and you may not receive back the same amount that you invest. Please note that tax treatments depend on personal circumstances and the rules may be subject to future change.


If you have any questions about this article, or wish to discuss your financial circumstances, please do not hesitate to contact Relationship Manager, Phil Sole and House & Community Coordinator, Emma Walker.

We welcome all Chiswick residents to House of Killik, no appointment necessary.  Pop in for a chat and a coffee at 13 Devonshire Road – we look forward to meeting you soon.


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London W4 2EU
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