Q: What is the nil rate band? A: When you die, the Inland Revenue will add up the value of your assets. In the current tax year (2003/04), if your assets plus chargeable gifts made in the previous years amount to £255,000 or less, your family does not have to pay any IHT on them. This is known as the 'nil rate band'. If your assets exceed £255,000, IHT at 40% is due on everything over this threshold. Q: What are potentially exempt transfers (PETs)? A: These are gifts you make during your lifetime. They are potentially exempt (from inheritance tax) because if you survive for seven years after making them, they pass outside your estate and no IHT is due. Q: Is IHT payable on transfers between husband and wife? A: No IHT is payable on assets that pass between a husband and wife. Q: What are the implications of taper relief'? A: If you die between three and seven years of making a gift (PET), taper relief means that your family will not pay the full rate of IHT, if any, on the gift. The earlier the gift is made, the less tax will be due. Q: Who is the settlor? A: This is the person who has given something away through a trust. Q: What is a gift with reservation? A: If you give away an asset during your lifetime, but you can potentially benefit from the asset, it is called a 'gift with reservation'. This applies to any asset you continue to benefit from, or that you can ask to be returned if necessary. For further information about IHT see here, or contact us to find out how we could help you.