Many parents may have to redraft their wills to protect their children's future under proposed inheritance legislation changes, the Law Society has cautioned.
Tax experts at the Society are concerned about the "unintended consequences" that a measure introduced in the Finance Bill would have on bereaved minors' trusts (BMT) and 18-25 trusts, which are usually established by parents to provide for their children in the event of the children being orphaned.
The tax law committee has already written to HMRC about its concerns related to the change, which would require trustees to obtain a court's consent before distributing trust assets.
Section 32 of the Trustee Act 1925 empowers a trustee to distribute trust assets for the benefit of a beneficiary.
Under the government's proposed amendments, for property transferred on or after 8 April 2013, the Section 32 power must be excluded or restricted for the trust to qualify as a tax-advantaged BMT or 18-25 trust.
The proposed amendments are intended to have effect in relation to property transferred on or after 8 April. However, any will which provided for an 18-25 trust or a BMT trust which has not come into force (as the testator has not yet passed away) will be affected because the property will be transferred into the trust on death after 8 April.
Due to these changes, testators who want their funds to enter the tax-advantaged BMT and 18-25 regimes will have to rewrite their wills, the Society's tax law committee said.
These consequences could be avoided with the introduction of proper legislation before they create confusion, injustice and unexpected costs, the Society said.