Inheritance Tax on Trusts - Damage Limitation

Inheritance Tax on Trusts - available only if put in place by 6th April 2008.

Radical changes to the Inheritance Tax regime for trusts were introduced by the Finance Act 2006 resulting in many cases where Inheritance tax is payable where this was not formerly the case. The new regime applies significantly to existing trusts by will or deed and will apply on death to those wills which contain trusts where the testator is now still alive. There are very few exceptions.

There is however a transitional period until 6th April 2008 during which time some existing trusts can be amended to comply with the new regime and avoid the new charges. If they are not amended by then, it is too late.

You can of course alter your will at any time during your lifetime while you have mental capacity to do so. Please bear in mind that a will which may benefit minors or indeed adult persons contingently on attaining a certain age creates a trust if any of them have not reached the specified age when you die. Your will may have such a provision, for example, if their parent dies before you.

If you are a trustee you have a duty to review your existing trust and obtain advice on the impact of the new rules and as to any tax avoidance available. Individuals should consider with their solicitor the terms of their existing will to discuss the relevance of the new rules to its provisions and whether any changes should be made to lessen their impact.

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