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Last Updated: Friday, 9 June 2006, 09:09 GMT 10:09 UK
Tax climbdown on wills welcomed
Money and a calculator
Lawyers had feared millions would have to review their wills
Millions of people no longer face the threat of having to change their wills, solicitors have said after ministers altered tax plans for trusts.

Gordon Brown has promised to amend plans which it was claimed could hit disabled people and widows - and force families to pay expensive legal fees.

Critics say fears remain for grandparents wanting to help with their grandchildren's school fees.

The Treasury denies making a U-turn, saying the changes are only technical.

Widows fear

Controversy erupted when the chancellor unveiled changes to the inheritance tax rules on family trusts in this year's Budget.

Critics said the plans could impose big tax bills on widows and grandparents setting up trusts for their grandchildren and people losing the ability to manage their financial affairs through illness.

The Treasury says its changes would ensure widowed spouses are still exempt from paying inheritance tax when their partner dies.

It has been common for parents to write wills so that money inherited by their young children is held in trust until they are 25.

But in the Budget, Mr Brown said trusts must now pay out at 18, or pay even more tax.

His new amendments are designed to make sure that taxes do not start accumulating as soon as the trust is formed - for example, where a child loses their parents at age 12.

There are also changes to the rules on trusts set up for disabled people, whom the Treasury says will be completely unaffected by the changes.

'More sensible'

Law Society President Kevin Martin said it was "very good news" that the government had "moved a long way from its original proposals".

"Solicitors will welcome the fact that many millions of their clients will not now have to go through the expense and trouble of having their will reviewed," he said.

"We are particularly pleased that spouse exemption will no longer be lost, something of concern to those in second marriages and those who wish to comply with Sharia law.

"The government is also taking a much more sensible line on will trusts vesting assets to children between the ages of 18 and 25."

But Mr Martin said the new tax rules could still hit existing trusts, trusts set up when people divorce, those established by people with early stage dementia and grandparents wishing to help their grandchildren.

'Still unfair'

For the Conservatives, shadow chancellor George Osborne said the changes looked like a "major U-turn" for Mr Brown.

"However, there are still big problems with the bill. It remains to be seen how much money has had to be wasted by families forced to consult lawyers and accountants.

"We will study the details and work to overturn the unfair parts of the new laws that the chancellor is yet to reverse.

"This was one attack too many on Middle Britain by Gordon Brown."

The Tories attacked the government for sticking by plans which would force control of trusts to go to children when they are too young.

But Treasury officials say people are adults in every other way at 18 and should have access to money which is legally theirs.

A spokesman said the amendments to the Finance Bill were only technical changes and did not alter the original policy.

"The amendments tabled today are straightforward clarifications of the government's original and unchanged policy," he said.

Inheritance tax rules tightened
22 Mar 06 |  Business
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11 Jul 05 |  Business


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