Changes to inheritance trusts mean it's time to act

Published on Friday 4 January 2008 20:27

ANYONE who has used a trust to plan for inheritance tax (IHT) should be aware of changes being introduced on 5 April, following an announcement in the 2006 Budget.

The two main types of trust affected are "interest in possession" (IIP) trusts and "accumulation and maintenance" (A&M) trusts.

Trustees now have three months to make any required amendments.

With IIP trusts – also known as flexible trusts – trustees must consider who is to be the named beneficiary. For example, if the current beneficiary does not need the trust assets and would rather their children benefited, it could be changed to their name.With A&M trusts the main consideration is whether to change the age at which the beneficiary receives any capital.

Julie Hutchison, estate planning specialist at Standard Life Assurance, said: "My impression is that many trustees have been taking a 'wait and see' approach. The pressure is now on to take action. The area is rather technical and trustees should take legal advice. There are both great opportunities and pitfalls here."