Where there's a will there's a way

Sometimes business and other assets are not so conveniently split as the Roberts' and equalisation between spouses is not practical. In that case, life assurance can also play a role.

A trap for the unwary if Mr and Mrs Roberts have borrowed money: a loan charged on business assets wipes out business relief to the extent of the money borrowed. Even an unsecured loan does partial damage. Borrowings should be reviewed to ensure they are charged specifically on non-business assets.

Farmers with valuable farmhouses can find this technique for getting 100 per cent relief on non-business assets a particular boon. This is because the value of the farmhouse is often out of all proportion to the value of the surrounding farmland. Unfortunately, HMRC have become increasingly difficult about granting relief on the home in such cases.

Take Mr and Mrs Farmer - they have agricultural land worth £800,000 and a farmhouse worth £1m. According to HMRC their home does not qualify for IHT agricultural relief.

Like the Roberts, the Farmers can defeat HMRC and escape IHT altogether if they make suitable flexible wills. If their farming arrangements are properly structured, Mrs Farmer will not need to survive Mr Farmer by two years. But, if the Farmers have borrowed money, their financial adviser needs to check that the borrowings are charged on the house not the land.

The moral is that owners of business and agricultural assets would be well advised to review their wills to ensure that 100 per cent tax relief can be turned into 200 per cent relief. Financial advisers can also do themselves and their clients a favour by advising clients that, with proper planning, they can achieve a 200 per cent IHT saving.

A word of warning, however: sophisticated technical provisions are required to pave the way for this strategy, and very few simple conventional wills contain these.

Richard Kirby is partner and head of the private client department of law firm Speechly Bircham