Inheritance Tax has fallen under the radar for many following the Chancellor’s announcement in the 2007 Pre Budget report when he made a useful change to the IHT legislation for married couples and civil partners to ensure that they benefited from two Nil Rate Bands without the need for IHT planning on the first death.

This is a welcome change to the legislation but should not be relied on as the solution to a couple's IHT liability. Having easily introduced the legislation, it could just as easily be withdrawn or altered. Inheritance Tax (IHT) concerns more of us than ever before. Mainly this is because the sharp rise in the value of houses over the last 10 years (by far the biggest asset for most people) has been much greater than what is known as the 'Nil Rate Band'. Below this key level (currently £315,000) you pay nothing on estates you pass on when you die. Above it, you pay 40% tax.

There are a number of exemptions to IHT such as transfers between spouses or civil partners, gifts of up to £3,000 a year and gifts to charities and political parties. An individual’s IHT liability will also depend on other factors such as if he or she has made a will, and whether assets are wholly owned or jointly owned.

So get the basics right.

Make sure that assets are owned in equal parts by a couple, and that a valid will is in place which includes suitable trust arrangements to ensure full use of the Nil Rate Band on first death. Nonetheless many people will still have significant IHT liabilities, mainly because of the price of their home. Some will say ‘Do nothing, the children can pay’, while others will take measures ranging from simple life cover/savings plans to more aggressive tax planning strategies. There as many solutions as there are individuals with an IHT liability.

Generally speaking, the more straightforward the solution, the more flexible and robust it is. We have in the past seen very complex and convoluted IHT mitigation strategies that then fall foul of future changes in the law.

IHT planning is made more complex as it has a very long tail. The earlier you start to plan, the easier it is to implement, but the longer it needs to be monitored and reviewed. Flexibility in any plan is essential. IHT and trust legislation has changed significantly over the past few years and this rate of change is likely to continue.