Thousands of families nationwide may not benefit from changes to Inheritance Tax (IHT) laws unless they alter their Wills, it was claimed this month.
Experts in the legal industry have said that those who had set up discretionary trusts will not be able to take advantage of the new “family home allowance” announced by the Government a couple of months ago.
Under new rules, which are gradually being phased in over the next few years, couples will be able to make use of the allowance – which will be worth hundreds of thousands by the end of the decade.
But it has become apparent that those who had set up discretionary trusts – a previously popular way of minimising the amount of IHT that people were eligible to pay – will not be able to capitalise on the new rules.
The problem arises from the fact that the family home allowance, which will be introduced in April 2017, is for those who leave their property to direct descendants – including children, grandchildren, stepchildren and fostered/adopted children.
Since discretionary trusts – widely used prior to a previous change of the law in 2007 – leave a degree of flexibility about who will receive the assets, it means that they will not qualify for the new allowance.
Those who have previously entered into such an arrangement are being encouraged to consider making amendments to their current Will.
However, other forms of trust, such as Interest in possession (IIP) and those for bereaved minors are compatible with the forthcoming change in legislation.