In all of the above examples, however, the amount of the gift is only potentially liable to IHT. 

Officially, lifetime gifts of this nature are referred to as Potentially Exempt Transfers (PETs). This is because, if, from the date of the lifetime gift, you survived at least another seven years, the gifts would then become exempt.

However, if the giver died within that seven year limit, the gift would be added back into the value of the estate on the following sliding scale. This scale is based on number of years death occurs since and percentage of value added back in: 

• 0-3 years – 100% 
• 3-4 years – 80% 
• 4-5 years – 60% 
• 5-6 years – 40% 
• 6-7 years – 20% 
• 7 years +  – Zero 

Assuming you can afford to run your life in the way you wish, therefore, giving away money or possessions during your lifetime is a valid way of reducing the eventual inheritance tax liability for your beneficiaries.