Inheritance tax (IHT) is one of the most disliked of all direct taxes. This is because it is a stealth tax imposed at death on assets that have generally already suffered tax in the lifelong accumulation process. Increasingly, people want to avoid these taxes.

At present, the IHT threshold, called the personal nil-rate band (NRB) is set at £300,000 so any assets above this amount will incur the 40 per cent tax. There are a number of options for those with assets above the IHT threshold:

1. Take the tax liability on the chin and pay it in full, posthumously.
2. Pay it in advance by means of monthly instalments to a life insurance company - a whole life policy can be written in trust for the likely tax bill, which is payable on death.
3. Convert one’s wealth into asset classes which are exempt from IHT.
4. Place one’s assets out of reach of the taxman by removing them from one’s taxable estate by gifting them away.

The first two of the above options are generally untenable to all but the most altruistic of taxpayers who might be content to be double-taxed in favour of the incumbent government's current spending plans. The third option sounds terrific but very few people are able, or prepared, to transfer the majority of their assets into private business or agricultural investments (the main areas enjoying full exemption). This really leaves option four as the only feasible route for most people.

There are many ways to gift assets away to beneficiaries without incurring IHT but the single most difficult aspect of this approach is the loss of control of, and access to, wealth that one has taken a lifetime to accumulate. Why do people save for retirement? To ensure they have a financially secure dotage. It therefore seems perverse that the only tenable solution to IHT is to gift away this security.

For some years the solution has been to establish flexible trusts into which one can gift money without losing either control or access. However, the Treasury has introduced a whole series of 'rules' preventing 'reservations' over one's gifts. Recently this has culminated in the introduction of pre-owned asset tax (POAT) and various other rules that make gifting into trust much more difficult. In March 2006 Gordon Brown, who really is First Lord of the Treasury now, changed the tax status of gifts into trust so that they are all now taxable transfers. This has not stopped such gifts but instead has restricted them to gifts within the NRB.

Fortunately there are many specialist trust schemes available from lawyers, investment managers and insurance companies which make such gifts both more efficient and flexible in terms of permitting different levels of future access.

Of course, if you have plenty of money you may well be relaxed in giving it to your beneficiaries immediately, with no strings attached, and this is by far the most effective approach to avoiding IHT.