Thousands of parents may need to rewrite their wills to protect their children’s interests because of inheritance law changes introduced in the Finance Bill, the Law Society has warned.
The Society’s tax law committee has written to HMRC to voice concerns over what it says are unintended consequences of a change that will mean trustees have to get a court’s consent before distributing trust assets.
Section 32 of the Trustee Act 1925 gives a trustee the power to distribute trust assets for the benefit of a beneficiary.
Under the proposed changes, for property transferred into settlement on or after 8 April, the Section 32 power must be excluded or restricted for the trust to qualify as a tax-advantaged bereaved minors’ trust (BMT) or 18-25 trust.
The government’s proposed amendments are intended to have effect in relation to property transferred on or after 8 April.
However, any will which provided for a BMT and 18-25 trust which has not taken effect (as the testator has not yet died) will be affected, as property will be transferred into the trust on death after 8 April 2013.
As a result of the changes certain testators who wish their funds to enter the tax-advantaged BMT and 18-25 regimes will have to rewrite their wills, the committee said.
Law Society president Lucy Scott-Moncrieff said: ‘I’m sure the government doesn’t intend to penalise orphaned children, or to require a significant number of parents to redraft their wills to protect their children’s futures.
‘We all know that unintended consequences can arise from legislation, and it is very fortunate that the watchfulness and diligence of our expert solicitor members gives the government the opportunity to put this right before it creates injustice, confusion and unforeseen expense.’