| TENS of thousands of families who set up trusts for their children and grandchildren were left reeling by the Chancellor’s trust bombshell.
On Mr Brown launched a surprise stealth tax on trusts that are commonly set up to escape punitive inheritance tax (IHT) bills. It is estimated that about 100,000 families could be affected by the changes.
To soften the blow, the Government has given trusts a period of grace until April 2008, during which it will be possible to adjust existing trust wordings. Families that may be affected will have to wait until the proposals for the new rules are published in July.
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Until now, money left to children or grandchildren under a trust was treated as a potentially exempt transfer, allowing the beneficiaries to escape paying inheritance tax if the parents or grandparents survived a further seven years. But the money didn’t actually have to pass to the children until the trustees deemed fit, say at age 25 or even older.
But these trusts are now liable for inheritance tax as a result of the Budget changes, although there is a get-out clause if the beneficiaries are still young enough. Existing trusts will be brought within the new rules unless the assets are made available to beneficiaries no later than 18.
Article date: May 2006 |
