By Julie Pickford Your recent article about inheritance tax (IHT) on March 6 caught my attention. As tenants in common, my wife and I own the cottage next door, which we bought in 1998. We are still renovating and improving it.

We would prefer to gift the cottage to our two daughters, partly to reduce our estates for IHT valuation. However, we wish to avoid paying capital gains tax.

We find it difficult to accept that tax is due at all and that at least half the gain will be due to our hard work and expense to restore the property. How can we achieve the above, or at least keep CGT to a minimum?

RJB of Headington A gift of the property to your daughters would be a disposal for CGT purposes and the deemed proceeds of sale would be the market value of the property at the date of gift. If the property is still partly run down, its value should be less and you could therefore consider making the gift now, rather than later, when its value will be higher.

You can take into account the construction costs, but not simply redecoration. As the property is jointly owned, half of any gain will be taxable on each of you. You will both be entitled to an annual CGT allowance and the balance of gain will be taxable on each of you at your marginal rate of tax.

You could make the gift in stages over two tax years, thus making use of two years' annual exemptions each, and the lower rates of tax. Seek professional help. A rough estimate of my estate for inheritance tax (IHT) shows that £45,000 would be payable on my death. If I left this sum to a registered charity in my will, would it escape the taxman or must it be paid before I die?

WH of Kennington Charitable bequests may be made in a will and they are exempt from IHT. However, to mitigate the £45,000 completely, you would have to bequeath the capital sum that gives rise to the IHT charge of £45,000 rather than simply the IHT itself - in this case £112,500. Non-charitable bequests are generally chargeable, so it is better to make such gifts of capital during one's lifetime to reduce the chargeable estate on death.

For gifts of capital to fall outside the estate,they should be made at least seven years before death. Those made between four and seven years obtain some relief from IHT. Inheritance planning is complex and you should seek specific advice for your circumstances. Julie Pickford is a partner at chartered accountant Mazars Neville Russell. Write to her for free advice at Mail Money, Mazars Neville Russell, St Thomas House, 6 Becket Street, Oxford OX1 1PP. Advice is for guidance only. Registered to carry on audit work and authorised to carry on investment business by the Institute of Chartered Accountants in England and Wales.