Pictured above: Richard Ashton
The Capital Gains Tax (CGT) increase announced in this week's
budget will mean trustees and personal representatives
administering the estates of the deceased could feel the full brunt
of the rise as gains made will be at risk of exposure to the new
higher rate, warns Linder Myers in Shrewsbury.
The new rate of 28% will apply to any gains made while the
estate is being administered, and also gains for the duration of a
trust (subject to exemption or relief).
Will trusts, created by parents of young children or vulnerable
adults, are particularly exposed to the new regime, says Linder
Myers.
Richard Ashton, Partner in the Trusts and Estates Planning
department says: "Many hardworking 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%, CGT at 28%and the impact of the
changes to the inheritance regime introduced in 2006.
"Personal representatives, trustees and anyone else appointed to
set up a trust and settle assets within it should urgently seek
advice from their solicitor to ensure that arrangements are
structured as tax efficiently as possible for the benefit of these
vulnerable beneficiaries in the light of these new
developments."
Tread carefully
Linder Myers is urging trustees and those charged with the task
of administering an estate to tread carefully when reviewing trusts
or practices in light of the new CGT rate.
Richard Ashton adds: "This reinforces the importance of
using a solicitor instead of an unqualified, unregulated Will
writer for trust or probate matters. In light of this new tax
regime and the complications that come with it, do you really want
an unqualified, unregulated executor or trustee administering your
estate after you pass away, rather than a solicitor who is
professional, robustly regulated, qualified and insured?
"Even where a solicitor has not been appointed to administer a
trust or estate, anyone who has been given that role should go to a
solicitor, who is best placed to take all these issues into
account."