The changes to Capital Gains Tax and Income Tax announced in the budget last month will have an impact on wills and trusts. Those who have the responsibility of administering an Estate during the Probate process will find that the increase in CGT will mean more tax is being paid out on any gains made.
Many trusts are set up by parents who wish to leave their children funds for the future in the event the parents pass away. However, setting up trusts in this way may not necessarily be the best solution now that CGT and Income Tax have increased.
Law Society President Robert Heslett says:
“Many hard working families will often look to create a protective tax regime for their children in the event that they are orphaned at a young age by leaving assets in trust until the children are old enough to manage the assets without the guiding hand of their parents.
“There is a real danger of trust assets being eroded through a combination of income tax at 50 per cent, CGT at 28 per cent and the impact of the changes to the inheritance regime introduced in 2006.
It is very important to seek good advice before setting up a trust when administering an Estate since the tax increases means that standard practice in the area of setting up trusts may now need to be revised.