Inheritance tax is the tax that is paid on an estate.

This is usually taken to mean everything owned at the time of your death, less what you owe.

IHT is also sometimes payable on assets you may have given away during your lifetime. Assets include things like property, possessions, money and investments. But, as we shall see, if disposed of properly, assets given away should not trigger an IHT charge.

Not everyone pays IHT on death. It only applies if the taxable value of your estate (including your share of any jointly owned assets and assets held in some types of trusts) when you die is above £300,000 (2007-2008 tax year). This 40 per cent tax is only payable on the excess above the nil rate (£300,000) band.

There are a number of exemptions which allow you to pass on amounts (during your lifetime or in your will) without any IHT being due. These include:

* If the estate passes to spouse or civil partner and you are both UK domiciled

* Gifts made more than seven years before death

* Sums of money given away each year tax free (currently £3,000 a year). If any of this allowance is unused it can be carried forward into the next tax year (but no further). In other words, you could give away up to £6,000 in any one year if you hadn't used any of your exemption from the year before.

* Gifts of up to £250 to as many people as you wish but such gifts are only exempt if the total given to one person in a given tax year does not exceed £250.

As Scahill at The Fisher Family Office says: “There are a quite a plethora of products and ideas out there. It normally involves taking something and turning it into a gift, putting it into trust or using the seven year rule.”

But his first advice is simple but crucial.

“Everyone needs a good will,” he says.

Where there’s a will, there’s a way

Advance planning is the key to mitigating the effect of IHT.

We’re starting to get into complicated areas which is why Scahill suggests “everybody needs to get good advice”. It could be the best money you ever spend.

Essentially, the will has to be written tax efficiently. A married couple are better off having their assets in their own name rather than jointly held because if an allowance is not used it is lost. Jointly held assets would pass automatically to the survivor.

You might consider rewriting your will, leaving assets up to the value of the nil rate band directly to the children, or alternatively use a discretionary trust. Trusts - and in particular the control they give over the timing of the release of assets - can be useful when minors are potential beneficiaries or when money left to another beneficiary might tip them over the edge in terms of their own tax burden.

Whatever route you choose, getting your affairs in order is absolutely essential to avoid losing a large chunk of your assets to the taxman.

If you don’t make a will then the taxman will decide who gets what. And if you aren’t married or in a civil partnership your partner will not inherit automatically. A will can ensure your partner is provided for.

Equally if you’re divorced you can decide whether to leave anything to an ex-partner.

One final point on wills, Scahill suggests it is is important to take into account where you are living and not just your country of Domicile (ie the UK).

“You may need to have a will for your country of residence as well as you may find they have the Napoleonic Code in place.”

It is sound advice as the Napoleonic Code - in place in many countries in Latin America (as well as France) has a different take on property, inheritance and succession.

French laws on inheritance give the taxman there a much greater say in who will inherit your estate and in what proportions. The laws often prohibit you from leaving assets to the beneficiaries of your choice and in the proportions you may wish.

If you want to leave French property to the person of your choice, the best way is probably to buy it in joint names in a manner designed to leave the survivor with the ownership of the whole property.