We all work extremely hard for our money and are therefore entitled to spend it in whatever way we choose. George Best (among many others) has been quoted as saying, "I spent most of my money on fast cars, fast women and fine wines... and wasted the rest".

An ideal life involves spending your money enjoying the wonderful experiences that life has to offer (or whatever else it is that gives you pleasure), then arriving on your death bed with exactly the value of the Inheritance Tax nil-rate band left to bequeath. I want my sons or a deserving charity to have my money when I die, not some faceless government official who has done nothing at all to deserve it.

But, in my urgent rush to get my net assets down to £300,000 (2007/8) I shan’t be spending recklessly; my aim is to pass as much as I can to my beneficiaries free of tax, so that if I can’t spend it all myself then at least whatever is left will go to someone I care about. Am I being selfish? Yes, maybe I am, but it’s my money and I have the right to do with it whatever I like (legally, of course).

Where is all this leading? Well, I just want to suggest some ways of passing on your wealth to the people you want to have it, while you are still alive, without incurring exorbitant tax bills.

If you need to avoid large amounts of tax, then the Wills and Trusts department of your firm of solicitors should be your first port of call. The legislation surrounding trusts is very complicated and requires the services of a skilled professional to guide you through the maze. Listed below are just some of the simple things you can do to help matters along, though they could, in principle, make a large difference if pursued diligently.

Child Trust Fund
Not particularly generous, but every little helps. Parents or grandparents can contribute up to £1,200 a year to a child trust fund for a child born after 31st August 2002 for whom child benefit is payable. Interest (or capital gains) roll(s) up untaxed within the fund, though the child cannot withdraw the money until they are 18.

Potentially Exempt Transfers
You can give any amount of money to anyone you choose, free of all Inheritance Tax – provided you live for at least 7 years after the date of the gift and provided you do not retain any benefit in the assets being given. This prevents you giving your personal home to your children whilst you continue to live in it, for instance, though your solicitor may have a solution for such cases. Even if you do not survive the gift by 7 years, there is some taper relief which starts to take effect after 3 years.

Wedding Gifts
Wedding or civil partnership ceremony gifts (to either of the couple) are exempt from Inheritance Tax up to certain amounts:

• parents can each give £5,000
• grandparents and other relatives can each give £2,500
• anyone else can give £1,000

Annual Exemption
You can give away £3,000 in each tax year without paying Inheritance Tax. You can carry forward all or any part of the £3,000 exemption you don't use to the next year but no further. This means that a wife and husband could each give away up to £6,000 in any one year if they hadn't used any of their exemption from the year before.

Gifts out of Income
Any gifts you make out of your after-tax income (but not your capital) are exempt from Inheritance Tax if they're part of your regular expenditure. The donor must be able to demonstrate that the gifts are habitual (e.g. a standing order), are made from after-tax income and leave them with sufficient income to maintain their usual standard of living.

Using your Nil Rate Band on Investment Properties
Please refer to Edition 1 of VIewpoint, the Viceroy Invest e-zine. You can find this on our website by clicking "News" and then "E-zine Archive". By holding investment properties as Tenants in Common, and making an appropriate will, a married couple can effectively double their Nil Rate Band from £300,000 to £600,000. Unfortunately, this approach may no longer work with certain types of trust and your Permanent Private Residence – known outside tax circles as "your home"! Talk to your solicitor.

Last Will and Testament
Everything you leave to your spouse is free of Inheritance Tax, but be aware that when they subsequently leave it to (say) your children, IHT will be payable in full, subject to just one nil-rate band. Everything you leave to a UK charity is also exempt from IHT.

A few things to think about!

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