There are annual gift allowances which can be done to reduce the estate, such as £3,000 per year to one individual or spread across several individuals.

It is possible to make larger gifts, however, if the individual who gifted passed away during 7 years, then the value of the gift can be brought back into the estate for assessment.

You can make regular payments to help with another person’s living costs. There’s no limit to how much you can give tax free, as long as:

• You can afford the payments after meeting your usual living costs
• You pay from your regular monthly income

These are known as ‘normal expenditure out of income’. They include:

• Paying rent for your child
• Paying into a savings account for a child under 18
• Giving financial support to an elderly relative

If you’re giving gifts to the same person, you can combine ‘normal expenditure out of income’ with any other allowance, except for the small gift allowance.

For example, you can give your child a regular payment of £60 a month (a total of £720 a year) as well as using your annual exemption of £3,000 in the same tax year.

Making pension contributions not only benefits you personally from preparing for your eventual retirement, but pension funds are also ring fenced from inheritance tax. This means, individuals who know they are above their IHT threshold and have surplus funds, why not look to utilise your annual pension allowance.

With pension freedoms, If you die before you've taken everything from your pension pot, its value will usually be paid as a lump sum to your beneficiaries. The beneficiary could be a dependant, a nominee or a successor.

A dependant is someone who is financially dependent on you. This could be:

• Your legally married husband, wife or your civil partner;
• A long term unmarried partner – they can be treated as financially dependent, even where the relationship was one of financial interdependence;
• Former husband or wife (if they were married to you when you were first entitled to take the benefits from your pension) or civil partner (if they were your civil partner when you were first entitled to take the benefits from your pension);
• Children under the age of 23, or older if they suffer mental or physical incapacity or are still receiving full time educational or vocational training.

A nominee can be any other person, even if they are not your dependant and can also be a charity.

The nominated beneficiary can pass on any unused drawdown funds on their death to their own nominated beneficiary, known as a successor.

In addition, if you die before age 75, your entire pension pot can be paid to your beneficiaries tax-free and they can choose to take it as an annuity, a lump sum or through beneficiary drawdown.
If you die age 75 or older - your pension pot can be paid to your beneficiaries either as a lump sum or through beneficiary drawdown, or an annuity. All payments will be subject to income tax at their marginal rate.