The rising value of assets means people are inheriting larger legacies. But the property boom and the increased value of investments means the portion which must be paid to the Revenue Commissioners by way of taxation is greater than ever before.

While the children of well-off parents will inherit assets which have greatly increased in value, many may not be aware of the sting in the tail - the huge capital acquisitions tax bill.

Capital acquisitions tax includes levies such as inheritance tax and gift tax. However, the increase in asset values are most likely to cause pain to those facing inheritance tax bills - even though expenses such as solicitors' costs, funeral expenses and debts are deductible when calculating the amount owed.

For example, parents whose house was worth £140,000 a few years ago could have left the property to their offspring without incurring any tax liability.

But assuming that same house is now worth in the region of £250,000, a single recipient could face a potential inheritance tax bill of £31,000 when the property was left to them.

Mr David Loan, of Bank of Ireland Asset Management, says people who bought houses a long time ago are often not aware of how much the capital value of the property has increased and consequently do not know how to reduce the potential tax liability.

However, the property boom is bringing the message home to many of them. And as a result, people who never needed to worry about inheritance tax before are now looking for methods to minimise the tax bill which will face their offspring, he adds.

Banks, accountants and financial advisers are having to come up with new suggestions for their clients on how to get out of the inheritance tax net. As ever, there is no shortage of advice.

Most experts suggest an obvious starting point - drawing up a will. The reasons are clear. In the absence of a will the affairs of a deceased person become subject to intestacy, where everything is simply bequeathed in a rigid fashion that may not be what the deceased wanted. The result may be friction between the recipients. When drawing up a will the general thrust should be to spread the bequests as widely as possible, says Mr Fred Kerr, taxation manager with Ernst & Young.

In other words, leaving £400,000 between two means they both have to pay inheritance tax, whereas if it is spread between two children and four grandchildren, each will receive sums below the individual threshold for inheritance tax of £188,400.

Other common advice is to make your move long before your twilight years. Mr Kerr says annual transfers, to children and grandchildren, can be made over a long duration. For example an annual gift of £500 can be made to any number of beneficiaries and will not incur any taxation, says Mr Kerr. He adds that over a period of years the total cumulative amount of transfers could become substantial.

Assets likely to rise in value should be transferred to beneficiaries as early as possible so that any future increases in the value accrue to the beneficiary, says Mr Kerr. Assets retained, he adds, may give rise to greater tax costs when they are eventually transferred.

Under present legislation where a gift gives rise to a capital gains tax (CGT) liability as well as a gift tax liability, the former can be offset against the latter, resulting in only one tax charge, Mr Kerr points out.

Mr Loan gives an example of where a father gifts a property of £500,000 to his daughter. This triggers both a CGT liability of £80,000 for the father on the disposal and a gift tax liability of £89,730 for the daughter. However, when the father pays his CGT of £80,000 that can be offset against the gift tax bill, leaving the daughter with a tax bill of £9,730.

Of course like every area of taxation there are reliefs available. For example if you bequeath all your money to a registered charity there is a generous relief available, while "heritage items", including pictures, books and certain buildings can be exempt from inheritance tax in certain cases.

For people passing on agricultural property there is a 90 per cent reduction from the market value of the property when deriving its value for inheritance tax purposes.

However, this is subject to certain conditions, one of which is that after the recipient takes the land, 80 per cent of his or her assets must comprise agricultural property. If the recipient already has a valuable property in Dublin this could be a problem.

A similar relief exists for people bequeathing businesses, although the business has to be owned by the donor for the two years before it is passed on. Mr Kerr points out that business relief applies to shares in the company as well.

At a recent conference, Mr Philip Smyth, a partner in BDO Simpson Xavier, said the amount of tax being paid by family members has been falling. He took the example of a business worth £5 million which a father wants to hand over to a child.

In 1993, such a transfer would have attracted a tax bill of £1.9 million. Last year, though, because of business asset relief the amount of tax to be paid would be £120,780, he said.

There is another relief called "favoured nephew" where if the nephew or niece of the donor has worked full time for a business or profession owned by the donor he or she can avail of the top threshold - £188,400, instead of the normal threshold for such individuals of £25,120.

Other people might want to consider setting up a discretionary trust to hold what they are passing on for recipients who are very young or who are incapable of managing their own affairs.

The main advantage of a trust is that no tax is imposed until awards from the trust are made to the beneficiaries. People holding Government gilts can gift or bequeath them to non-domiciled recipients without incurring either gift tax or inheritance tax. So a daughter living and working in London might be the most cost effective recipient of a gift or bequest of gilts.

Life assurance policies can qualify for favourable tax treatment under capital acquisition legislation under what is known as Section 60. If your policy is adapted for Section 60 it means there are no inheritance tax liabilities when the policy pays out. To hold a policy under Section 60 does not normally mean having to pay extra premium, which is a big advantage.

One area of inequity which the December Budget may address is where cohabiting couples are governed by what is known as the "stranger" rule. In other words, if one of the partners in a long-term cohabiting situation dies and bequeaths to the remaining partner, that person is liable for inheritance tax and can only avail of the lowest threshold which is currently £12,560. In other words if the remaining partner is bequeathed £200,000, he or she is liable for inheritance tax on £187,440, which means a significant tax bill. However, the Revenue Commissioners point out that cases of "hardship" can be treated differently.

Compare to this to a married couple. If the husband bequeaths everything to his wife, there is no inheritance tax liability at all.