Like many people, you're maybe unsure how to make Inheritance Tax (IHT) rules work in your favour. You could potentially become liable to a tax bill that could impact on the money you can pass on to your family.

In the 2009/10 tax year everyone is allowed to leave up to £325,000 on death without suffering any IHT. This is known as the nil-rate band. Any excess over the nil-rate band may be taxed at 40% although transfers between married couples or civil partners are free of IHT. Furthermore, the nil-rate band for married couples and those in civil partnerships could be as much as £650,000. This is because couples are able to transfer the proportion of unused nil-rate band on their death to the estate of their surviving spouse or civil partner.

But what if the value of your estate is over the nil-rate band?

The good news is that there's a lot you can do to avoid paying IHT unnecessarily. A financial adviser can help you explore the different ways that you can reduce the size of your estate and minimise any potential IHT liability. You can do all this while keeping as much control as possible over your money and other assets.

Trusts are an important part of effective estate planning. As well as helping you reduce or avoid any IHT liability, they can be used to make sure that your estate is managed efficiently after you die.

Standard Life offers a selection of trusts which can be used with our International Bond. Our Gift Plan, Loan Plan and Discounted Gift Plan each does something slightly different for your estate and the amount of access you and your chosen beneficiaries have. For example, the Gift Plan is all about the beneficiaries - you gift the full amount to them and you don't have access to it. A Loan Plan might suit you better, because you can ask for your original capital at any time, with the added advantage that any growth will be outside your estate when it comes to IHT. Lastly, the Discounted Gift Plan gives you access to agreed withdrawals but any remaining balance is for the beneficiaries.

Both the Gift Plan and Discounted Gift Plan offer a further benefit to you - the amount of your gift is considered outside your estate if you live for seven years after setting up your trust. After that the gift isn't included in the value of your estate and can be ignored when working out your IHT bill.

Estate planning is all about finding the right fit. Combining a trust with an International Bond can offer real peace of mind for you and for your family. You should speak to your financial adviser for further informtaion on the right solution for you.

Please remember that with an International Bond, the value of your investment can go down as well as up and you might get back less than you paid in.

All of the information on this website relating to taxation is based on our understanding of law and tax practice in Ireland and the UK as at August 2009. Legislation and taxation are liable to change in the future.