There are currently two rates of inheritance tax. There is the nil-rate sum (currently £250,000) and once that has been exhausted, tax is charged on the balance of the estate at the rate of 40%. Where inheritance tax is payable on an estate no Grant of Representation can be obtained until the amount due is paid to the Inland Revenue.

Individuals whose taxable estate is more than the IHT threshold or a married couple whose joint estates total more than that limit, will normally wish to take steps to limit their IHT liability. The object of the exercise should be to maximise the inheritance of those to be benefited.

Steps that a married couple with children may consider:-

a) A measure of equalisation of the two estates and the conversion of any joint tenancy to tenancy-in-common.
b) A gift to the children of the beneficial interest in the matrimonial home of the first to die.
c) A discretionary trust with the survivor and children as the principal beneficiaries from which a loan can be made to the surviving spouse. The advantage being that a debt depletes the surviving spouse's estate for IHT purposes.
d) Whole of life savings plan in trust for the benefit of the children.

Steps that a single person or married couple without children may consider:-

a) A measure of equalisation of the two estates and the conversion of any joint tenancy to tenancy-in-common.
b) A gift to a Trust of the main residence or a share of the main residence to benefit other family members.
c) A discretionary trust with relatives and friends as the principal beneficiaries.
d) Whole of life savings plan in trust for the benefit of other family members.