What you need to know about....Inheritance Tax.

Inheritance tax is the tax paid to the government on assets passed to beneficiaries of a deceased person. The tax is paid at 40% on amounts over a threshold, currently £325,000. So amounts given below that amount are tax-free. If the assets, property/money/possessions, are given to a spouse or civil partner the whole amount is tax-free. If it is given to a child or grandchild the deceased person's estate threshold increases by a further £100,000.

The current government is in the process of raising this threshold to £1,000,000 when you account for two children and the fact any unused threshold can also be passed on to a spouse.

One way around this threshold is to gift before death. This brings into play the seven year rule. If you gift and live for seven years, the gift will not form part of your estate and your estate's tax threshold, it will be tax-free. There is a sliding scale depending on how many years you live after gifting or a taper as it is known. You can gift your house, and if you live for seven years this will not be taxable. If you continue to live in the house you would have to pay rent to the new owner and a share of the bills.

There are further rules on gifting. You can gift £3,000 per year tax free and you can gift sums from your ordinary income, providing it does not result in a drop in your living standards, this would include Christmas and Birthday presents. You can also give wedding gifts tax free - £5,000 for a child. Gifts to spouses and civil partners are always tax free. Charitable and political donations are tax-free.

Of course this is a gentle overview. Inheritance tax becomes much more complicated when it involves trusts and has international aspects. In this case you really need to seek expert advice, its beyond the scope of a humble blog...