new taxation rules for trusts - change your will?

The 2006 Budget detailed new taxation legislation for Trusts. There are now new rules for Interest in Possession Trusts (IIPT) and Accumulation and Maintenance Trusts (AMT). In particular, AMTs have always been used where children are involved, for instance, where parents or grandparents wish to pass on assets to their offspring without those assets being squandered. Typically, they allowed children to receive an income from a trust until the age of 25 when they became entitled to the capital.

AMTs will now be subject to an immediate IHT charge of 20% on trust set-up transfers exceeding the IHT threshold (currently £285,000) and an anniversary charge every ten years at 6% of the Trust value over the IHT threshold. There will also be charges on any funds taken out of the trust during the ten year period.

However, AMTs will continue to be exempt from IHT if they are created on death by a parent for a minor child who will be fully entitled to the capital at age 18, as will any AMT set up for disabled persons.

If it may be necessary to rewrite your will, under these circumstances, we would suggest that you discuss the matter with ourselves, from a tax planning point of view, and we can also recommend an appropriate firm of solicitors who can assist with any will drafting.