If you gift more than the allowance (which is not exactly generous) and pass away within 7 years, Inheritance tax becomes payable. (This assumes your estate is worth more than Â£263k [allowance this tax year]).
A vehicle you may be interested in learning about which allows you to make larger gifts to reduce Inheritance tax immediately, yet retain some degree of access for yourself is a Discounted Gift Trust.
This would allow you to gift cash to your beneficiaries, although they would not be allowed acces to it until the inevitable happened to you.
However you must take an income (which is tax free within certain limits) FOR LIFE from the gift you have made.
The result is that on starting the trust and making the gift, the Inland Revenue class a considerable portion (e.g. 70% for a healthy 60yr old female) of the amount put into the Trust as being immediately outside the estate for Inheritance Tax purposes.
After 7 years the whole amount falls outside the estate, and you have then avoided Inheritance Tax on the complete gift. But of course you are still receiving the income for life.
Don't hesitate to e mail me or call if you want more info on this.
Investment and Inheritance Tax Planner
Zurich Advice Network
e mail: email@example.com
Tel: (office) 0208 437 2500 (m) 07957 440 724
[I advise on Inheritance Tax Planning, and specialise in Discounted Gift Trusts and Investments]