Warning over wills 'stealth tax'

THOUSANDS of Suffolk residents were today warned they face what equates to a new “stealth tax” on trusts from the summer, under proposed changes to inheritance tax.

THOUSANDS of Suffolk residents were today warned they face what equates to a new “stealth tax” on trusts from the summer, under proposed changes to inheritance tax.

Experts on wills and trusts are helping concerned people work through the government's budget proposals amid claims Treasurer Gordon Brown has underestimated the impact the changes will have throughout the country.

Ipswich firm Pretty's Solicitors is so concerned about the changes, and the thousands of pounds in extra tax that people with trusts will have to pay, that it is encouraging clients to write to their MP calling for a government rethink.

Carol Lockett, a partner at the Elm Street firm, said: “I don't think the government appreciated how big an impact this was going to have.

“The problem is they have this inherent distrust of trusts. They seem to think trusts are only established for tax avoidance and that is not the case.”

The Treasury today scoffed at suggestions that up to ten million wills would have to be revised nationwide due to the changes to inheritance tax on trust funds, at a cost of up to £2.5billion in legal fees.

Most Read

But Miss Lockett said it was likely that between a third and two thirds of the country's 15million wills would be affected.

The changes result from a decision by the government to make all three types of trusts subject to inheritance tax.

One of the biggest areas to be affected would be when couples leave money to their children for it to be collected when they reach an age over 18. Those trusts will now be subject to inheritance tax.

Miss Lockett said: “A lot of people are saying we'd rather pay the tax and make sure the children have the balance at 25 than have them squander it at 18.”

She added: “This is money that they haven't paid before. It's almost a stealth tax.”

At the moment the changes remain only budget proposals but if the Bill passes through Parliament in the summer they will come into affect from April 6, 2008.