Budget 2006 - IHT implications

We have had many calls about the Budget and the retrospective tax changes to Interest in Possession and Accumulation & Maintenance trusts.

Discretionary Trusts to IHT Exemption Level?

This is the only form of IHT mitigation we have advocated within Wills. In simple terms - at present - Discretionary Trusts are still acceptable to use as means of doubling the exemption level for married couples.

At the new level each spouse can utilise £285,000 so the couple can pass on an estate of £570,000 free of IHT. A tax saving of £114,000 (40% of £285,000)

WARNING Given the retrospective nature of the tax changes to the IiP and A&M trusts, most commentators are emphasising the fact that future legislation could possibly undermine the use of Discretionary Trusts as well. Clients must be advised that this is the best option at present - but they MUST keep reviewing their estate planning arrangements on a regular basis.

The Sunday Times (Money Section) 26th March 2006 had two useful background articles - click the links below:

Families hit by crackdown on trust funds

Here are your alternatives ...

Money Box Live (Radio 4) 27th March had a very realistic discussion on all the IHT options available to a widowed gentlemen trying to pass assets to his children. The discussion is here as an mp3 file(8 Mb).

Left click and open to listen to it straight away or right click and Save Target as ...

Money Box Live - Trust changes and IHT options

(Most modern computers will play mp3 files in Media Player, RealPlayer, etc.)