Changes to the rules regarding Trusts have been documented
recently with warnings that up to one million people could
be forced to rewrite their wills. However determining whether
the new costs could apply to you is a confusing area, KPM
Financial Planning advises.
With two months to go until the new rules become law, there
are still uncertainties regarding how the changes will be
implemented. However the proposals outlined in this year’s
budget are sure to have a big impact and now is the time
for individuals to check whether they are affected.
Paul Millar at KPM, comments: “It has been reported
that the new costs which will apply could result in the end
of Trusts for British families. While this remains to be
seen, it is important for people to get their wills in order
now to ensure that their wishes are met and that any taxes
are kept to a minimum.”
Firstly individuals whose wills contain a trust to be set
up on their death will need to review their documents. Accumulation
and Maintenance Trusts will be affected. These are generally
set up by parents or grand parents so they can pass assets
to grandchildren or children but which will be controlled
by a trustee until a certain age. In the past this could
be any age however under the new rules, assets and control
must pass to the recipient when they are 18 or the trust
could face a six per cent tax charge every ten years on any
value above the Inheritance Tax (IHT) threshold of £285,000
(tax year 2006/07).
Interest in Possession Trusts will also be affected. These
are used to provide a spouse with an income but the assets
pass to the children. Assets worth above the IHT threshold
could be charged a 40 per cent IHT charge plus a six per
cent tax charge every ten years.
Individuals who set up these trusts in life rather than
in a will, will also be subject to the new costs.
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