How we could reduce the pain

What can be done to prevent a third of homes becoming potentially liable to inheritance tax within 20 years? Some suggestions are:

· Increase the IHT threshold to keep pace with house price inflation - a proposal put by the Royal Institution of Chartered Surveyors, Council of Mortgage Lenders and the Halifax.

· Reduce the 40 per cent rate. This is one option being examined by the Conservative party, which has identified IHT as one of five unfair taxes.

· Refocus the tax on the wealthier estates, raise more from those who can afford it and redistribute the proceeds to the poorer families - a proposal from the left-leaning think-tank the Institute for Public Policy Research.The IPPR suggests a banding system, similar to income tax, on rates of 22, 40 and 50 per cent rather than the current flat rate.

· Drop inheritance tax completely. It is a relatively new tax, introduced in 1986 by the then Chancellor Nigel Lawson. Many other countries get by without such a tax. The US plans to phase out its federal version of IHT in the next few years.

· Remove the family home from the IHT net. This could help put IHT back to where it was originally intended to be - as a tax on a small number of large estates, not as another tax on the middle classes.

· Use the funds generated by IHT - if we keep it - to pay for long-term care. Philip Spiers of the Nursing Home Fees Agency suggests a modified IHT could be used to used to finance long-term care and to avoid the huge financial pressures many people experience now. 'As it is a tax on death, it would also keep track on demographics,' he says.

· Make administrative changes so that families do not have to struggle to pay the IHT bill within six months. In the worst cases, families can be forced into a quick sale of a property at a poor price to pay the tax. This type of situation is likely to arise when the home is the only, or main, asset in the estate.