Inheritance tax is not working. That’s because of a conflict between two needs:

1. Allow people to pass on their property to their wives and children
2. Prevent families from living off old money for generations, and becoming wealthy freeloaders.

This leads to trade-offs and to weak and ineffective taxation. But there is a simple way to achieve both goals fairly with a modified tax.

Someone should be able to leave money to his wife, nearly tax free. If he is estranged from his wife, he should equally be able to leave money to his mistress. If he’s not married, he should be able to leave money to a sister, or a friend or neighbour. There is no reason these people should suffer tax, any more than a wife would.

People leaving money to their children should pay a high tax. Grandchildren should pay a much higher tax, because the money is skipping a generation. Really, old money should pay inheritance tax twice to pass down two generations.

Leaving money to a much younger wife or friend. It’s debatable whether a high tax should be paid. This argument requires that it should.

The answer is to apply a tax based on the age-difference. For example the tax rate could be 0.5*(deceased_age-beneficiary_age). There should also be a threshold below which no tax is paid. This simple change allows inheritance tax to meet both its requirements, and treat all kinds of relationships fairly.