Newsletters
Autumn News
Trust In Money
There is an old saying - invented by a lawyer - "do not put your trust in money, but put your money in trust". There are many reasons for setting up trusts, but one of the commonest is to allow someone to look after an inheritance for a beneficiary who is too young to have full control of substantial amounts of money.The trouble is that HMRC have tended to think of trusts as ways to avoid tax, and the charges have become more severe in recent years - in particular to Inheritance Tax. Now Income Tax is going to jump substantially on 6 April 2010 for all discretionary trusts: they will be subject to the new top rate of income tax of 50% on income over £1,000. If the income is paid out, the tax paid by the trustees will usually be a credit in the hands of the beneficiary, but the huge hike in current tax charges is clearly a disadvantage.
Anyone who is the trustee or beneficiary of a discretionary trust should be considering their options, which include changing the terms so that it is a more favourably taxed interest-in-possession trust, or winding up the trust altogether. Unfortunately neither of these choices preserves the main aim of the trust: to protect the beneficiary from having access to the money.
If you are affected by these changes, we will be happy to look at the alternatives with you.