Handwritten notes by Margaret Thatcher about her time in Downing Street have been given to the nation under the inheritance tax Acceptance in Lieu scheme, saving her estate around £1 million in IHT.

The news is a reminder to those with heritage assets - works of art, sculptures, manuscripts and other family heirlooms - that you may be sitting on a time bomb in terms of inheritance tax that will explode on death. But if you want to pass down the asset without passing on a large IHT bill, there are options available.

There is no automatic IHT exemption for heritage assets, regardless of their national importance. IHT will apply to the assets at death at the rate of 40 per cent subject to the owner's available nil-rate band and any relevant reliefs or exemptions.

The tax is not eligible for payment by instalments, so assets in the estate may need to be sold to raise enough cash to meet the bill or, as with Lady Thatcher's papers, they may have to pass outside of the family or sold.

The Acceptance in Lieu scheme is an option. It applies to assets that are adjudged to be sufficiently 'pre-eminent' according to a set of criteria aimed at identifying items of national, scientific, historic or artistic interest. Qualifying assets can be offered to the nation in full or part payment of the IHT liability on that asset and/or any other chargeable assets in the estate.

Arts Council England's 'Cultural Gifts Scheme and AIL Report 2014' contains 23 successful applications ranging from oil paintings by John Constable and Thomas Gainsborough to examples of Chelsea Porcelain and land at Mount Stewart, a country house in Northern Ireland.

However, while the AIL scheme provides relief from IHT, it does not allow the item to be kept in the family which, for many, is important. Is it possible to keep an heirloom in the family without triggering an IHT bill every generation? Yes, with planning.

A 'Conditional Exemption' from IHT could be applied for. This allows the item to be kept by the family on the owner's death, exempt from IHT, provided certain undertakings are given to H M Revenue & Customs.

These include allowing 'reasonable' public access to the item, ie not just by private appointment, preserving the item and keeping it in the UK. If any of the undertakings are breached, the IHT that would otherwise have applied on death becomes immediately payable. The conditional exemption applies to a similar category of assets as the AIL scheme, ie they need to pass the 'pre-eminence' test.

The owner can gift the heirloom to the younger generation during his lifetime with the aim of ensuring the asset is not part of his estate for IHT purposes at death. Making an outright gift is the most straightforward option, and the IHT benefits will be achieved once the donor has survived seven years from the date of the gift; however, it is not advisable for valuable assets where the recipient is young or at risk of divorce or bankruptcy. Capital gains tax should also be considered.

A gift to a trust for younger family members is a better alternative, although, because the creation of most trusts comes at an IHT cost (albeit lower than that which applies at death), this option will be most attractive to those with 'pre-eminent' assets capable of qualifying for the conditional exemption, or those who can create or use a trust with offshore status.

Creating a family-run charity to hold a collection of heritage assets is another alternative. Gifts to charities are exempt from IHT and there will be no death or event that will trigger a later IHT charge. The charity must be for the public benefit, which will likely necessitate the assets being on public display, but this option does allow the family to remain in control.

If nothing else, however, high net worth individuals with heritage assets should ensure they have IHT-efficient wills so as to defer any IHT on the asset until the death of a surviving spouse or civil partner (therefore allowing interim planning).

Previously published in Spear's magazine on 26 August 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.