In the past, Inheritance Tax (IHT) was considered to be the domain of the very wealthy, but with increasing property prices and the stagnant IHT threshold, the incidence of this tax is becoming more common.

An individual’s estate normally comprises assets such as the value of their home, savings and investments assets like quoted shares as well as personal possession such as jewellery.

Amounts owed by an individual at the date of their death are taken into account to determine the value of their net estate.

Where an individual’s net estate exceeds the nil-rate band of £325,000 (£650,000 for married couples) on death, IHT of 40% is levied on that excess. This nil-rate band will now continue to apply until April 5, 2018.

Those who are less reliant on capital for security in retirement or to fund future care costs and where adequate financial provision for their spouse has already been made, could make sizeable gifts during their lifetime to children or grandchildren to save tax in the future.

Annual gifts of up to £3,000 per individual are completely ignored for IHT purposes.

If this exemption has not been used in the year, it can be carried forward to be used in the following year, potentially giving scope for up to £12,000 to be gifted for married couples.

Gifts made by parents to their child on the occasion of marriage are also exempt from IHT up to £5,000 per parent (£2,500 for gifts made by grandparents).

Lifetime gifts to individuals in excess of such exemptions will be free of tax provided the donor survives seven years thereafter.

Some measure of IHT relief might be available where the donor survives at least three years from the date of gift.

For those who are contemplating making more substantial gifts, but may have concerns about the ultimate destination of assets or wish to protect assets from young or inexperienced beneficiaries, the use of nil rate discretionary trusts” during lifetime or through their wills can play an important role.

Indeed such asset protection afforded by trusts is often the key reason for setting them up.

Individuals transferring property into trust during lifetime in excess of £325,000 will generally suffer an IHT charge of 20% on that excess.

IHT may also be payable by the trust on each 10-year anniversary of when it was set up at the rate of 6% on the excess above £325,000. But up to that threshold there is no liability.

Gifting assets other than cash to individuals may crystallise a Capital Gains Tax (CGT) liability.

That liability can be avoided if the asset is made to a trust.

So gifts into trust can avoid CGT and IHT (up to £325,000) and will protect assets for the individuals who can benefit.

Trusts pay income tax at the top rate but income can be channelled to any beneficiary to use up the Personal Allowance and lower tax bands of children or grandchildren to minimise the overall tax bill.

Although the issue of IHT is often considered to be a taboo subject, careful and early lifetime planning can help mitigate the loss of wealth from a deceased’s estate and the use of trusts can also play an important role in tax mitigation and in protecting hard-earned assets.