We're answering your questions on Inheritance Tax.

Bob Trunchion, a partner with the chartered accountants MacIntyre Hudson, is the man we've asked to shed some light.

As same sex couples do not have the option to marry, how can we protect life partners from homelessness and poverty caused by Inheritance Tax?

Inheritance Tax can be a major problem for couples who have a valuable estate (which is usually their house), if the exemption for transfers between spouses for IHT is not available.

At the present time, this exemption is not available either for same sex or common law relationships.

This has been labelled by many as discriminatory but challenges under the human rights legislation have so far failed.

I am not aware that the government has any plans to change the law.

Unfortunately it can be very difficult to avoid this problem.

Some planning schemes using trusts can be available but these are usually complex and expensive.

However, often the simplest method in such a case is to insure against the likely Inheritance Tax liability.

The policy should be arranged so that the proceeds on death are paid into a trust for the beneficiary under the will, as if not, Inheritance Tax will also be due on the amount received from the insurance company.

Having spoken to an IFA, currently a 40-year-old male non-smoker could obtain �100,000 of life cover for approximately �75 per month.

Mr Smith asks: "To reduce nursing home charges, my mother gifted her house to me (her son).

"She retains the right as a life-long tenant at a nominal rent.

"Our solicitor argues that as a gift with reservation the house is treated as part of my mother's estate and on her death is liable for Inheritance Tax.

"The accountant argues that the house is liable for Capital Gains Tax. It should be put in a trust to spread the Capital Gains Tax burden.

"Who is right?"

On the facts outlined, both are correct, assuming that you do not live within your mother's house.

For Inheritance Tax purposes, where someone makes a gift but retains a benefit, the value of the property gifted will still be included within their estate.

Here your mother has retained the benefit of living within the house.

However, in law, the asset is in fact owned by the recipient, ie yourself.

It will therefore also be included within your estate, and should the house be sold (either before your mother's death because she needs to move or after because you want the money), any capital gain arising on the increase in value since it was gifted to you will be subject to Capital Gains Tax.

A trust could be used to avoid the CGT liability, for if the property was held in trust and one of the beneficiaries was your mother, for whom the house is presumably their main residence, the gain arising could be exempt from Capital Gains Tax.

You must remember that to get this CGT advantage, the trust would probably lead to some the value of the property falling back into your mother's estate!

This interaction between IHT and CGT is a major problem.

It is also questionable whether the arrangement would have any effect in reducing the nursing home charges your mother could be liable for.

Under the relevant legislation, transactions undertaken with an intention to deprive a local authority of assets that could fall to be taken into account for a means tested benefit (such as care home fees) can be looked through when assessing an individual's financial position.

Therefore, where an individual makes a gift with this intention, it does not matter when that gift was made, the transaction can effectively be ignored for the purposes of assessing their liability to nursing costs.

This is clearly a matter where expert advice is required.

Simon lives in a house with his grandfather, mother and father.

His grandfather owns the house; it was transferred into his name when his wife died about 10 years ago.

On his death (he is now 92) the house will go to Simon's mum and she and his dad will have to face a 40% Inheritance Tax charge (the house is probably worth �700,000 to �800,000).

Both his parents work part-time and couldn't afford the tax bill - but don't want to sell the house because it's been their home for 35 years, so what can be done?

Often there are problems with individuals gifting a property and continuing to live within it.

There are specific rules which mean that such assets will still be treated as part of their estate.

However, in this case, as the beneficiaries live within the property, these rules can be avoided.

Simon's grandfather can gift part of the property to Simon's mum and dad, and provided that they pay their share of the upkeep and household expenses, the gift will be valid for Inheritance Tax purposes (there is a specific exemption from the reservation of benefit rules in this restricted situation where donor and donee both occupy the property).

However, the gift will be treated as a potentially exempt transfer (PET).

Therefore, if Simon's grandfather dies within seven years of the gift, there will be Inheritance Tax to pay, although this will be at a reduced rate if he dies between three and seven years after the gift.

Assuming that there is not a high value for the other assets within Simon's grandfather's estate, it would potentially be worthwhile for his grandfather to retain approximately a 25% share of the house.

Provided he lived for a further seven years, this share, or the majority of it would be covered by his nil rate band.

Therefore, either no or minimal Inheritance Tax would be payable, and this share could be transferred to Simon, reducing the value of the property within Simon's parents' estates.

As a further point, there are provisions whereby the payment of an IHT liability arising on assets such as a house can be spread over 10 years.

Given the value of the house in this case, and the likely IHT charge, this may be of little assistance.

However in the worst case of a full Inheritance Tax charge arising, the immediate cost can be mitigated by opting to pay the tax over a 10 year period.

Interest is charged on the outstanding amounts, but the rate is very low (currently 3%), so this can be cheaper than taking out a loan to pay the Inheritance Tax liability.

Alternatively, there are various schemes available which transfer the value of the property into trusts, removing it from the owner's estate.

However, these schemes still rely on the PET rules, and cannot avoid the Inheritance Tax charge if the person making the transfer dies within seven years.

Richard Swan of Ashford in Middlesex says: "My in-laws, who are both still alive, plan to leave their estate three ways - one-third to my wife and the other two-thirds to our two children, aged 17 and nine.

"The total value I would assume to be around �500,000 on the death of both of them. I have heard of a term called tenants in common.

"Could this be used in our case to enable one person to leave his or her half of the house so that it reduces paying Inheritance Tax on the whole amount upon the death of both people?"

In a word, yes (as the property is in England and Wales; were the property in Scotland, the rules are different there).

There are two ways that property can be held jointly - "joint tenancy" or "tenants in common".

In the case of joint tenancy, when one person dies their share of the property automatically transfers to the surviving owners.

Where property is held as tenants in common, an individual's share of the property can be left to whoever they choose.

Therefore, provided the property is held as tenants in common, the wills can be drafted such that the first spouse to die leaves the property to the other beneficiaries.

Providing the share of the property is below the value of the nil rate band for Inheritance Tax (currently �255,000), no Inheritance Tax will be payable and the surviving spouse can continue to reside in the property by virtue of their share.

In this particular case, given that two of the proposed beneficiaries are currently minor children, it would be wise for the will to set up a trust to hold their share in the property until they are adults or even beyond!

We must always remember that while house prices have meant that our property can give rise to tax headaches, planning to reduce that tax is fraught with problems elsewhere.

Where ownership of your house (your home!) is transferred, it becomes exposed to the co-owners' problems, which can include divorce, bankruptcy, death (yes - children can die before their parents).

Responsible advisers will always point this out and take steps to minimise the potential problems but often they cannot be eliminated.

If the property is currently held under joint tenancy, you will need to arrange for a solicitor to prepare the necessary documentation to change the basis of ownership, and make the necessary revisions to the wills.

This can be a very efficient means of ensuring both spouses make use of their nil rate band, and can save up to approximately �100,000 in Inheritance Tax.

It should be pointed out that this would divert the assets from the surviving spouse so before anyone restructures their wills to do this, they must consider if their surviving spouse will be left with enough to live on!

There are ways around this by using what are called Nil Band Discretionary Trusts and a good adviser should be able to give details about this.

Mrs Quadri from London is thinking of making her and her two daughters joint owners of the house in which she lives. When she dies will they only have to pay inheritance tax on one third?

This will depend on the precise circumstances.

If the two daughters will be living within the house and paying their share of the upkeep and household expenses, only the remaining third would be included within Mrs Quadri's estate.

However, if the daughters did not live within the house and pay their share of the expenses, the gifts would fall foul of rules applying to "gifts with reservation".

Where someone makes a gift of an asset but retains a benefit in it, as would be the case here with Mrs Quadri continuing to live within the house, the full value of the asset is included within their estate for Inheritance Tax purposes.

There is a further downside if the gift falls foul of these rules. Although the whole value of the house would be included in Mrs Quadri's estate for Inheritance Tax purposes, the daughters would be seen as owners of their share, and if the property was sold they would have to pay Capital Gains Tax on their share of any gain arising.

"We have kept his house, used now as a holiday home, for family.

"The house was valued at �100,000 and is now worth about �150,000. It is still in my wife's and my name as executors.

"If it was to be sold is there any way we could avoid paying at least some of the 40% Inheritance Tax on the increase in value?

"Could we, in the future, claim for repairs against IHT e.g. a replacement roof?"

Should the property be sold, it will subject to Capital Gains Tax and not Inheritance Tax.

The value of the property used in the calculation is the value when father died, compared to its sales proceeds ie the increase in value since his death is subject to CGT.

Should the property be sold, this increase in the value of the property, even though it is still held in the names of the executors, will be treated as being taxable on the three beneficiaries as a capital gain.

The tax then payable on each third share would depend on the beneficiaries' personal circumstances.

Any capital expenditure on the property, such as a replacement roof, could be taken into account when calculating the gain.

There should also be an element of discount on the gain due to what they call taper relief (the Inland Revenue issue some very good introductory guides to this).

It needs to be noted that as the property is within Scotland, Scottish law will apply to the means by which the property is held and transferred. However, this should not affect the treatment in respect of tax.